(Bloomberg) -- Diageo Plc is forming a joint venture between its Ciroc vodka brand and a tequila backed by basketball star LeBron James.

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Ciroc will join with tequila brand Lobos 1707 in the venture, offering a solution for Diageo, which had been seeking to offload the vodka label following a decline in sales and a legal bust-up with its former marketing partner, the music mogul Sean “Diddy” Combs.

Bloomberg News reported in December that Diageo had reached out to potential suitors, including beverage companies and buyout firms, to gauge their interest in Ciroc.

Diageo has instead formed a venture with Main Street Advisors Inc., an investment and advisory firm led by Paul Wachter, who helps manage the fortunes of celebrities such as Arnold Schwarzenegger and Los Angeles Lakers star James. Lobos, founded in 2020, is a premium tequila brand established by actor Diego Osorio.

As part of the deal, Diageo is exchanging its majority ownership of Ciroc in North America for a majority stake in Lobos 1707 globally. The UK beverage group, which also owns brands including Guinness and Johnnie Walker, will retain the rights to Ciroc outside the US.

Diageo needed to do something “different and fresh and innovative” to restore the Ciroc brand, which led to the tie-up with Main Street Advisors, according to Ed Pilkington, chief marketing and innovation officer for Diageo North America.

Financial terms weren’t disclosed, but Diageo won’t retain a majority stake in the venture. James will remain an investor in Lobos and become an investor in Ciroc through the tie-up.

Diageo agreed to a settlement with Combs in January 2024 following a lawsuit in which he accused the spirits company of racism in its alleged neglect of Ciroc and another brand, DeLeon Tequila. He withdrew his allegations and business relations were ended.

The UK group, along with rival distillers Pernod Ricard SA and Remy Cointreau SA, has been struggling to drive growth due to slumping demand in China and high post-pandemic inventories in the US. Diageo’s stock has dropped about 30% in the past year, wiping some £18 billion ($23 billion) from its market value.

The company has been divesting assets as it manages its stable of brands, agreeing last July to sell Pampero rum and Safari flavored liqueur. While Ciroc sales have slumped of late, the vodka has a strong presence in nightclubs and there are hopes that Main Street, along with a new team, will be able to revitalize the brand.

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Nick Tran, the former global head of marketing at TikTok, has been appointed president and chief marketing officer of the venture and charged with making both brands resonate with a wider group of consumers.

--With assistance from Thomas Hall.

(Updates with Diageo share performance in ninth paragraph)

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