According to the Financial Times, leading brewer Diageo plc. DEO has decided to sell off its luxury hotel and golf resort Gleneagles in Scotland to lower its cost and lift its dwindling profits.
The deal, likely to be announced next week, is expected to fetch £200 million for the owner of Smirnoff. London hotel owner, Ennismore Capital, is reported to be a potential buyer of the hotel.
Diageo bought Gleneagles in 1984 from British Rail. The company had reportedly made an attempt to sell the property in 1998 which failed since it did not get the expected price. There were, in fact, rumors that early this June, 3G Capital, founded by the three Brazilian Anheuser-Busch InBev (BUD) and Kraft Heinz were considering a bid for the hotel. However, there was no confirmed news.
The deal is expected to provide a temporary relief to the U.K.-based brewer from its declining profits. In the last reported third quarter of fiscal 2015, net revenue declined 0.7% and volume dipped 0.8% year over year due to currency headwinds.
Analysts are of the opinion that Diageo should consider selling its other underperforming assets as well. Investors also speculate that the company is expected to sell off its small wine portfolio, which includes brands like Piat d’Or in Europe and other Californian brands.
Currently, Diageo has a Zacks Rank #3 (Hold). Investors interested in the beverage sector may consider Constellation Brands Inc. STZ carrying a Zacks Rank #2 (Buy). Other consumer staples stocks worth considering are Pilgrims Pride Corporation Inc. PPC and The WhiteWave Foods Company WWAV with a Zacks Rank #2.
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