Diageo enters sale leaseback arrangement

24th Jun 2010 14:39

Drinks brands giant Diageo has entered into a sale and leaseback arrangement on its North American wines business??, which is valued at approximately $260m (£174m)."The impact of the restructuring, including the sale and leaseback, on the income statement for the year ending 30 June 2010 will be broadly neutral as the profit on the sale of land is broadly offset by restructuring costs, inventory impairment and provisions made against the disposal of non-strategic brands," said the group.The land and facilities in Napa Valley, California will be purchased and leased back to Diageo by Realty Income Corporation under a 20 year lease, with Diageo holding options to extend the lease for up to 80 years in total. Diageo Chateau and Estate wines (DC&E) remains the operator of the properties under the agreement and retains ownership of the brands, vines and grapes, which remain a strategic part of Diageo's wine business. The benefit to free cash flow in the year ending 30 June 2010 is expected to be in the region of $200m (£13m).?? The transaction will also improve the return on invested capital of the DC&E business.The transaction is part of the previously announced review of the operations of DC&E which resulted in a reduction in the workforce and may also include the sale of non-strategic brands.?