Courvoisier deal expensive, will hurt margins
Campari hopes to refresh brand in longterm
Analysts say deal makes strategic sense
Shares slide 6, but recover in morning trade

MILAN, Dec 15 Reuters Campari shares fell as much as 6 early Friday on news it will spend 1.2 billion to buy French cognac brand Courvoisier the Italian spirits group39;s biggest deal yet, but one that will hurt its profit margin in the short term.

Campari has a track record of breathing new life into declining brands, analysts said, adding the deal made sense. The group is betting on reestablishing Courvoisier as a global icon of luxury, it said, making the cognac brand a key part of its growing spirits portfolio.

But Courvoisier will initially take around 80 basis points off the group39;s gross profit margin, according to executives, while Campari will fund the high price tag via a mix of cash, debt and equity.

The acquisition was expensive and to finance it Campari could issue equitylinked instruments said Angelo Meda, portfolio manager at Banor SIM in Milan, on why the shares fell.

Campari is buying one of the world39;s top four cognac houses from U.S.based spirits group Beam Suntory at a time when demand in Courvoisier39;s biggest market, the United States, has fallen from postCOVID peaks and wholesalers are destocking.

Over time, Campari believes the deal can boost group sales by 9 and earnings per share by 2.

It also hopes the deal can build its presence in key markets such as…