Equity Stake

Diageo PLC
06 February 2008



Diageo and Nolet to form a 50/50 company for super-premium Ketel One vodka

Diageo to pay $900 million for its equity stake

London and Schiedam, The Netherlands (5 February 2008) - Diageo, the world's
leading premium drinks business, and the Nolet family have agreed to form a new
50/50 company, which will own the perpetual exclusive global rights to sell,
market and distribute the successful super-premium Ketel One vodka.

Diageo has agreed to pay US$900 million for its 50% equity interest in the newly
formed company, which will be based in the Netherlands with the Nolet family
owning the other 50%. Due to its rights under the agreements Diageo will fully
consolidate the financial results of the new company accounting for the Nolet
holding as a minority interest. Profits from the sales, marketing and
distribution operations will be shared broadly equally.

The Nolet family will continue to own the brand rights for Ketel One and Diageo
will become the exclusive distributor of the brand globally.

Ownership of the Nolet distillery in Schiedam in Holland, where they have been
distilling since 1691 and where Ketel One vodka is manufactured will remain with
the Nolet family. The distillery will supply Ketel One vodka exclusively and
perpetually to the new company at an agreed rate of return.

Currently, Ketel One vodka has an annual volume of 1.9 million cases. It is
primarily a North American brand in the super-premium vodka segment and will
complement Diageo's premium Smirnoff and its ultra-premium Ciroc brands.
Similarly outside the United States Ketel One will expand Diageo's brand range
in vodka. The Nolet family and Diageo believe that this new relationship will
accelerate the growth of the brand in the USA and elsewhere in the world.

The transaction is expected to close by 31 March 2008, subject to the required
regulatory approvals and other conditions. Diageo expects that the transaction
will be EPS neutral in the first full financial year after closing and will be
economic profit positive in year five using a weighted average cost of capital
of 9%.

Both the Nolet family and Diageo consider this alliance to be perpetual.
However, should either party ever decide to sell its stake in the company, the
other party will have the right to purchase it at a price to be agreed. The
Nolet family has an additional right to put its stake in the company to Diageo
in the 4th or 5th year after closing for $900 million plus interest. If Diageo
buys the Nolet family stake, full ownership of the brand will transfer to
Diageo. Diageo can choose not to buy in exchange for a $100 million payment. The
family may then pursue a sale to a third party.

Commenting today, Paul Walsh, Chief Executive, Diageo, said:

'This transaction is strategically important for Diageo, giving us an interest
in an outstanding high quality brand and fantastic potential for global growth
in the super-premium vodka segment.

The new company represents a unique alliance in our industry.

'Diageo brings superior marketing and distribution expertise, together with a
track record of outstanding brand stewardship and the Nolet family brings a
truly great brand, based on a high quality distillation operation and invaluable
knowledge and heritage gained from over 300 years of tradition.

'We feel particularly honoured that the family have chosen Diageo as their
partner in taking Ketel One vodka forward to the next stage of its development.
We look forward to working with the Nolet family and their team.'

Commenting on the transaction, Carel Nolet Sr, said:

'We are proud to be partners with Diageo, the world's leading premium drinks
company, and look forward to working together with this team of highly talented
people.

The partnership between Nolet and Diageo will combine our brand building and
entrepreneurial skills with the unrivalled brand management, marketing and
distribution expertise of Diageo to fully develop the potential of Ketel One
vodka in the USA and globally.'

UBS Investment Bank acted as financial adviser and Sullivan & Cromwell LLP and
Morgan Lewis & Bockius LLP acted as legal advisers to Diageo in this
transaction.
                                     -ENDS-

For further information

For Diageo Investor Relations
Catherine James                    Kelly Padgett
[phone]                [phone]
[e-mail]         [e-mail]

For Diageo Media Relations
Stephen Doherty                    Jennifer Crowl
[phone]                [phone]
[e-mail]         [e-mail]

Isabelle Thomas                    Gary Galanis
[phone]                [phone]
[e-mail]         [e-mail]

For Nolet in The Netherlands       For Nolet in the US
D. Istha                           Jennifer Vides Blake, 
Huijskens & Istha                  Weber Shandwick                    
[phone]                    [phone]
                                   [e-mail]

For Nolet in London
Terry Garrett,                     Heather Wilson, 
Weber Shandwick                    Weber Shandwick
[phone]                [phone]
[e-mail]        [e-mail]

Notes to Editor

About Diageo

Diageo is the world's leading premium drinks business. With its global vision,
and local marketing focus, Diageo brings to consumers an outstanding collection
of beverage alcohol brands across the spirits, wine and beer categories
including Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Cuervo, Captain
Morgan and Tanqueray, and Beaulieu Vineyard and Sterling Vineyards wines. Diageo
trades in some 180 countries around the world and is listed on both the New York
Stock Exchange (DEO) and the London Stock Exchange (DGE). For more information
about Diageo, its people, brands and performance, visit us at www.diageo.com

About the Nolet Distillery and the Nolet family

Since 1691 the Nolet family, through the Nolet distillery and other group
companies manages the production, distribution, sales and marketing of a range
of super premium spirit brands including Ketel 1 Jenever and Ketel One vodka.

The business has its origin in Schiedam, the Netherlands from where it still
operates its distillery. The group focuses on personal relationships with
distributors, bartenders and its consumers that are essential for the success of
the company and its products. In 2007 the company produced ca two million cases
per year with a turnover of around Euro 165 million. The Nolet family is
actively involved with the group under the leadership of 10th generation Carel
Nolet Sr and his son Bob Nolet, both based in Schiedam and his other son, Carl
Nolet Jr, based in California, USA. The group employs around 180 people.

Cautionary statement concerning forward-looking statements

This announcement contains 'forward looking statements' within the meaning of 
'Safe Harbor' provisions of the United States Private Securities Litigation
Reform Act of 1995 with respect to the financial condition, results of
operations and business of Diageo and certain of the plans and objectives of
Diageo with respect to and outlook for these items. In particular, all
statements that express forecasts, expectations and projections with respect to
and outlook for future matters, including trends in results of operations,
margins, growth rates, overall market trends, the impact of interest or exchange
rates, the availability of financing to Diageo, anticipated cost savings or
synergies and the completion of Diageo's strategic transactions, are
forward-looking statements.  Forecasts, expectations and projections with
respect to future financial performance on an earnings per share and economic
profit basis are based on a range of assumptions, including assumptions with
respect to current exchange rate forecasts, the effective corporate tax rate,
trading conditions for Diageo and in markets generally, the success of
integration of any joint ventures or acquired businesses, competition in and
growth of premium drinks markets and assumed GNP growth in the United States.
By their nature, forward-looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements, including factors that are outside Diageo's control.

These factors include, but are not limited to: increased competitive product and
pricing pressures and unanticipated actions by competitors that could impact
Diageo's market share, increase expenses and hinder growth potential; the
effects of future business combinations, partnerships, acquisitions or
disposals, existing or future, and the ability to realise expected synergies and
/or costs savings; Diageo's ability to complete existing or future acquisitions
and disposals; legal and regulatory developments, including changes in
regulations regarding consumption of, or advertising for, beverage alcohol,
changes in tax law (including tax rates) or accounting standards, changes in
taxation requirements, such as the impact of excise tax increases with respect
to the business, and changes in environmental laws, health regulations and the
laws governing pensions;  developments in litigation or any similar proceedings
directed at the drinks and spirits industry; developments in the Colombian
litigation and any similar proceedings; changes in consumer preferences and
tastes, demographic trends or perception about health related issues; changes in
the cost of raw materials and labour costs; changes in economic conditions in
countries in which Diageo operates, including changes in levels of consumer
spending; levels of marketing spend, promotional and innovation expenditure by
Diageo and its competitors; renewal of distribution or licence manufacturing
rights on favourable terms when they expire;  termination of existing
distribution or licence manufacturing rights on agency brands; technological
developments that may affect the distribution of products or impede Diageo's
ability to protect its intellectual property rights; and changes in financial
and equity markets, including significant interest rate and foreign currency
exchange rate fluctuations, which may affect Diageo's access to or increase the
cost of financing or which may affect Diageo's financial results.

All oral and written forward-looking statements made on or after the date of
this announcement and attributable to Diageo are expressly qualified in their
entirety by the above factors and the 'risk factors' contained in the Annual
Report on Form 20-F for the year ended 30 June 2007 filed with the United States
Securities and Exchange Commission (SEC). Any forward-looking statements made by
or on behalf of Diageo speak only as of the date they are made. Diageo does not
undertake to update forward-looking statements to reflect any changes in
Diageo's expectations with regard thereto or any changes in events, conditions
or circumstances on which any such statement is based. The reader should,
however, consult any additional disclosures that Diageo may make in any
documents which it publishes and/or files with the SEC. All readers, wherever
situated, should take note of these disclosures.

                                     -ENDS-

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