As discussed below, we completed two acquisitions during the third quarter of fiscal 2023. Each acquisition was accounted for as a business combination.

On November 3, 2022, we acquired the Gin Mare and Gin Mare Capri brands through our purchase of 100% of the equity interests of Gin Mare Brand, S.L.U., a Spanish company, and Mareliquid Vantguard, S.L.U., a Spanish company (the “Gin Mare acquisition”). The purchase price of the Gin Mare acquisition was $524 million, which consisted of $468 million in cash paid at the acquisition date plus contingent consideration of $56 million.


(Dollars in millions)	Initial Allocation




Trademarks and brand names (indefinite-lived)	$	308
Goodwill	288


Total assets	596


Deferred tax liabilities	72



Net assets acquired	$	524

The contingent consideration of $56 million reflects the estimated fair value, at the acquisition date, of contingent future cash payments of up to €90 million to the sellers under an “earn-out” provision of the acquisition agreement. The estimated fair value of the contingent consideration was determined using a Monte Carlo simulation, which requires the use of significant assumptions, such as projected future net sales, discount rates, and volatility rates.

Any contingent consideration earned by the sellers will be payable in cash no earlier than July 2024 and no later than July 2027, depending on when the sellers choose to exercise the right to receive the payment. The amount payable will depend on the achievement of net sales targets for Gin Mare for the latest fiscal year completed prior to the date of exercise by the sellers. The possible payments range from zero to a maximum of €90 million (approximately $89 million as of the acquisition date).

At the acquisition date, we also entered into a supply agreement with the sellers for the production and supply of Gin Mare products to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

On January 5, 2023, we acquired the Diplomático and Botucal rum brands through our purchase of 100% of the equity interests of (a) International Rum and Spirits Distributors Unipessoal, Lda., a Portuguese company, (b) Diplomático Branding Unipessoal Lda., a Portuguese company, (c) International Bottling Services, S.A., a Panamanian corporation, and (d) International Rum & Spirits Marketing Solutions, S.L., a Spanish company; and (ii) certain assets of Destilerias Unidas Corp. (the “Diplomático acquisition”). The purchase price of the Diplomático acquisition consisted of cash of $727 million.


(Dollars in millions)	Initial Allocation
Accounts receivable	$	11
Inventories	33
Other current assets	25
Property, plant, and equipment	36
Trademarks and brand names (indefinite-lived)	312
Goodwill	365

Total assets	782

Accounts payable and accrued expenses	10
Deferred tax liabilities	45

Total liabilities	55

Net assets acquired	$	727

At the acquisition date, we also entered into a supply agreement with the sellers for their production and supply of rum to us, at market terms, for an initial period of 10 years (subject to subsequent renewal periods).

The initial allocation of the purchase price for each acquisition was based on preliminary estimates and may be revised as asset valuations are finalized and further information is obtained on the fair value of liabilities. The primary matters to be finalized consist of the identification and valuation of identifiable intangible assets, any related tax effects, and any resulting impact on residual goodwill.

The amounts initially allocated to trademarks and brand names for each acquisition were estimated using the relief-from royalty method, which requires the use of significant assumptions, such as projected future net sales, discount rates, and royalty rates.

Goodwill is calculated as the excess of the purchase price over the fair value of the net identifiable assets acquired. The goodwill recorded for each acquisition is primarily attributable to the value of leveraging our distribution network and brand-building expertise to grow sales of the acquired brands. For the Gin Mare acquisition, we expect none of the preliminary goodwill of $288 million to be deductible for tax purposes. For the Diplomático acquisition, we expect $109 million of the preliminary goodwill of $365 million to be deductible for tax purposes.

Results for Gin Mare and Diplomático have been included in our consolidated financial statements since their acquisition dates. Pro forma results are not presented as the aggregate impact is not material to our consolidated statements of operations.

In connection with the acquisitions, we recognized transaction expenses of $50 million during the nine months ended January 31, 2023, of which $45 million was recognized during the third quarter. The following table shows the classification of the transaction expenses in the accompanying consolidated statements of operations.



(Dollars in millions)	Three Months Ended January 31, 2023		Nine Months Ended January 31, 2023

Selling, general, and administrative expenses	$	3	$	8
Other expense (income), net	42		42
Total transaction expenses	$	45	$	50

The transaction expenses largely reflects payments made to terminate certain distribution contracts related to the acquired brands.