Business Daily from THE HINDU group of publications
Thursday, May 17, 2007
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Business Daily from THE HINDU group of publications Thursday, May 17, 2007 ePaper |
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Corporate
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Mergers & Acquisitions £325 m raised on the strength of Whyte & Mackay's assets Our Bureau
Bangalore May 16 The acquisition of Whyte & Mackay by United Spirits is through a combination of recourse as well as non-recourse funding. The £325-million debt has been raised on the strength of the target company's (Whyte & Mackay) assets, which includes five distilleries as well as its inventory of Scotch whisky worth £380 million. The Scottish company also boasts a capacity of 40 million litres (grain) as well as 12 million litres (malt). The company's annual sales for 2007 is expected to be around £200 million. With Scotch whisky in short supply, there has been a steady increase in the price of the liquor as well. The balance debt has been routed through an overseas SPV (United Spirits Great Britain) of United Spirits. The UB Group President, Finance, Mr Ravi Nedungadi, told Business Line that while ICICI Bank has pumped in £325 million, which will be non-recourse to United Spirits Ltd (USL), Citibank has pumped in £310 million recourse to USL. Out of the total £635-million debt, the acquisition cost is £595 million, the rest of the amount is for immediate working capital requirements. The banks have lent the money at 220 basis points above LIBOR rate. USL, on its part, holds 100 per cent of United Spirits Great Britain. Mr Nedungadi said with Whyte & Mackay's EBITDA in excess of £50 million, it will be more than sufficient to service the interest burden (which is less than £50 million) on the deal. "Earnings of Whyte & Mackay will be more than sufficient to cover the entire accretive debt," Mr Nedungadi said. An analyst with a brokerage firm said while United Spirits will achieve the scale, because of the acquisition it will not have enough money on the table and hence would need to work hard to grow the business. The UB Group, in its presentation to the investors, has also mentioned another option. As this paper had reported earlier, the group plans to list Whyte & Mackay with the London Stock Exchange and shed some stake in the company to the public and financial institutions. This will help the company revert to current debt equity ratio in the third year.
More Stories on : Mergers & Acquisitions | Overseas Borrowings | Breweries
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