Financial Daily from THE HINDU group of publications
Saturday, Jun 15, 2002
Corporate - Mergers & Acquisitions
SAB close to buying stake in Shaw Wallace
BANGALORE, June 14
THE $4.2-billion South African Breweries Plc has moved a step closer to buying a stake in the Jumbo Group-controlled Shaw Wallace & Co Ltd's beer business.
The top officials of SAB India Ltd met with Jumbo Group management in Dubai earlier this week. The SAB delegation included its Managing Director, Mr Richard Rushton, and the Finance Director, Mr Paul DeSilva. The talks centred around the size of SAB's stake in the company and the issue of management control, a requisite which the multinational has put forth aggressively.
Sources close to the negotiation did not rule out the possibility of SAB entering into a 50:50 joint venture or a 49 per cent stake buy in the beer company. SWC is in the midst of restructuring its alcoholic beverage business into two separate entities - Shaw Wallace Breweries Ltd and Shaw Wallace Distilleries Ltd.
When contacted, SAB India's Mr Rushton, who is currently in South Africa, declined to comment. A SWC spokesperson said talk about an impending deal was too early and speculative. "As of now, we are going ahead with our aggressive growth plans in the domestic beer market and you will see these plans unfolding in the days to come," he added. The spokesperson refused to comment on the Dubai visit of the SAB delegation.
PricewaterhouseCoopers has undertaken due diligence on behalf of SAB, while SWC is being assisted by McKinsey & Co. SAB sources said the due diligence was progressing and would be completed in the next few weeks. "There are some problems pertaining to lendings to Dunlop India Ltd (which is part of the Jumbo Group). We are in the midst of weeding them out," sources said.
Last year, the late Chairman of Jumbo Group, Mr Manu Chhabria, had announced plans to induct a foreign brewer as a strategic partner in Shaw Wallace Breweries. Besides SAB, Carlsberg Breweries is the other contender for SWC beer stake.
The Indian alcoholic beverage major's decision to divest stake in the beer business is being closely followed by its rivals and could trigger dramatic developments as the company is mired in a series of legal battles.
Shaw Wallace Breweries owns seven breweries across the country and has contract arrangements with a host of other small independent brewers. In 2001-02, Shaw Wallace sold close to 22 million cases of beer and accounted for over 25 per cent share of the domestic sales.
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