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Castle Brands Increases Stake in Gosling-Castle Partners

Zacks Equity Research

Premium branded spirits company, Castle Brands Inc. ROX made a strategic investment for an additional 20.1% stake in Gosling-Castle Partners Inc. ("GCP"). Following the ownership announcement, shares of the company jumped 10.3% on Mar 30.

In Jan 2005, Castle Brands entered into a national distribution agreement with Gosling’s Export (Bermuda) Limited and obtained the exclusive right to distribute Gosling’s rum products and rum-related gourmet food products in the U.S. Further, in Feb 2005, the company extended this relationship by acquiring a 60% controlling interest in a strategic export venture with the Gosling family. This venture is now known as Gosling-Castle Partners Inc.

Gosling-Castle Partners was formed to enter into an export agreement with Gosling’s Export that gives GCP the exclusive right to distribute Gosling’s rum and related products on a world wide basis.

Now, with an additional 20.1% stake, Castle Brands has increased the ownership of GCP to 80.1% and extended the terms of the agreement through Mar 2030, with 10-year renewal terms from then on.

Sales of Goslings Rum and Beer have increased in the U.S. and internationally, since the formation of GCP in 2005. Now, with the increase in ownership, Castle Brands’ strong sales and marketing initiatives are expected to boost Goslings Rum and Beer sales. This would help expand Castle Brands consumer base, thus enhancing profitability.

Meanwhile, in Feb 2017, Castle Brands entered into a National Supply Agreement with Walmart to supply Goslings Stormy Ginger Beer and Goslings Stormy Diet Ginger Beer to all Walmart stores in the U.S., in order to fortify its position in the U.S. market.

Stock Price Movement

Shares of Castle Brands soared 97.3% on a year-to-date basis, outperforming 7.8% growth recorded by the Zacks categorized Beverages - Alcohol industry.

Zacks Rank & Other Key Picks

Currently, Castle Brands carries a Zacks Rank #2 (Buy).

Apart from Castle Brands, investors may consider other stocks in the Beverages - Alcohol industry like Pernod Ricard SA PDRDY, Heineken NV HEINY and Compania Cervecerias Unidas, S.A. CCU.

Pernod currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company is anticipated to witness 3.9% growth in fiscal 2017 earnings.

Heineken, a Zacks Rank #2 stock, is expected to witness 6.9% growth in 2017 earnings.

Compania, also a Zacks Rank #2 stock, registered a 36.36% earnings surprise in the last quarter.

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