Campari: Courvoisier Acquisition Strengthens Competitive Positioning but Is Valuation-Neutral

We are reiterating our EUR 9 fair value estimate and our no-moat rating of Davide Campari-Milano following the company's announcement that it will acquire the Couvoisier cognac brand from Beam Suntory for EUR 1.2 billion in stock. We view the deal positively from a strategic perspective, but we regard the valuation, which we estimate to be around 21 times EBIT, as being high and unlikely to drive material value creation in the future. As Campari is trading at our fair value estimate, as at the close of trading on Jan. 22, we prefer wide-moat-rated Diageo and Pernod Ricard, which both trade at slight discounts to our valuation.