Diageo has signed an agreement to acquire full global ownership of Tequila Don Julio from Casa Cuervob, in order to strengthen its presence in the tequila market.

Under the terms of the agreement, Diageo will buy the remaining 50% stake in Don Julio tequila in exchange of its Bushmills whiskey assets to Jose Cuervo Overseas.

Diageo chief executive Ivan Menezes said: "This transaction delivers two key objectives for us. We have secured our position in the growing super and ultra-premium segments of the tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential.

"It delivers our strategy: to build our presence in the world’s fastest growing markets and lead the industry in the biggest growth opportunities."

The $408m transaction is expected to complete in early 2015 and is subject to certain approvals.

The net proceeds will be used to reduce debt at Diageo’s average rate of interest.

In the year ended 30 June 2014, Smirnoff volume and net sales were 285,000 cases and £9m respectively in Mexico while Bushmills volume and net sales in the same period stood at 800,000 cases and £57m respectively.

Volume and net sales of Tequila Don Julio were 590,000 cases and £105m, of which Diageo accounted for 345,000 cases and £75m net sales, in the year ended 30 June 2014.