Diageo takes a shot with Don Julio tequila ©Bloomberg Workers cut agave plants ahead of transportation to ovens for baking at Tequila Don Julio Diageo has filled a tequila-sized hole in its drinks cabinet after swapping its mainstream Bushmills Irish whiskey brand for full control of Don Julio, the premium tequila that it owns jointly with Mexico's Casa Cuervo. The deal follows the breakdown of talks two years ago with the Beckmann family to acquire Jose Cuervo, the world's top-selling tequila. IN Food & Beverage Deirdre Mahlan, Diageo finance director, said the agreement securing full ownership of Don Julio did not presage reopening of talks over Cuervo. "We're not in conversation about Cuervo, and I don't expect to commence any in the midterm," she said on Monday. Don Julio is a much smaller brand than Jose Cuervo, but it is a premium tequila, retailing at about £45 a bottle, which reinforces Diageo's strategy of focusing on fast-growing expensive spirits. Ivan Menezes, chief executive of the company that produces Johnnie Walker scotch and Smirnoff vodka, told the Financial Times in July that he was no longer interested in acquiring a mainstream tequila business after forging its own way with brands including DeLeón, in partnership with US rapper Sean "Diddy" Combs. But he said that Don Julio "is a brand we have a lot of heart for, and if some day we could own it outright we would want to." Under the terms of the deal, Diageo will sell Bushmills to Jose Cuervo Overseas and acquire the 50 per cent of Don Julio that it does not already own. It will also take back distribution of its Smirnoff vodka in Mexico from Cuervo. The transaction will result in a net payment to Diageo of $408m. It will dilute Diageo's earnings per share by 0.6 per cent in the year ending June 30 2015 and break even after three years. Bushmills, which sold 800,000 cases in Diageo's last financial year to June 30 2014, had net sales of £57m during the period. Diageo acquired it in 2005, but it has struggled to compete with Pernod Ricard's dominant Jameson Irish whiskey. Andrea Pistacchi, analyst at Citi, said: "Bushmills is not a big loss. The brand has been underperforming the Irish whiskey category, where growth has been driven by Jameson. Don Julio sold 590,000 cases last financial year and had net sales of £105m, up 27 per cent on the previous year. Ian Shackleton, analyst at Nomura, said: "We believe 100 per cent ownership of the brand could even accelerate this growth rate." Mr Menezes said the deal would also increase the group's exposure to Mexico "where the growth of spirits has great potential."