Discussions “relating to the future of the Cuervo brand have ended,” a Diageo statement said.
“Both parties will now work to ensure the orderly termination of the current distribution agreement, including transitional arrangements, at the end of June 2013,” it added.
Diago chief executive Paul Walsh was quoted a saying: “We believe that the future of the brand would be best delivered by aligning ownership of the brand with its route to market and I have no doubt that Diageo has the best route to market for this brand.
“However it has not been possible to agree a transaction which delivers value for Diageo’s shareholders and therefore, by mutual agreement, we have terminated our discussions,” he added.
Cuervo is distilled in Mexico on land given to Jose Antonio de Cuervo by the 18th century Spanish King Ferdinand the sixth.
Diageo was interested in the brand as part of its strategy to expand in emerging markets.
In November, Diageo said it would take control of the Indian company United Spirits in a deal worth about 1.6 billion euros ($2.1 billion)which would give it a foothold in the world’s biggest whisky market.