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Boby Kurian

Bangalore , Jan. 18

UNITED Breweries (UB) Ltd, the leading domestic brewer, is snapping up Karnataka Breweries & Distilleries Ltd (KBDL), the country's largest brewing unit, for Rs 180 crore.

Mr D.K. Adikeshavulu, a long time ally of the UB Chairman, Mr Vijay Mallya, currently owns the brewery, which has existing contract manufacturing arrangements with the latter.

UB will fund the acquisition from the cash raised through a stake sale to the UK-based Scottish & Newcastle (S&N).

UB's proposed takeover will come up for shareholder ratification at the EGM scheduled for Thursday, January 20. A few weeks back, S&N signed an agreement to pick up 37.5 per cent stake in UB in a deal valued at Rs 940 crore.

KBDL, located in the outskirts of Bangalore, has a present brewing capacity of 7.5 lakh hectolitre expandable to a million hectolitre annually. The beer market in Karnataka represents approximately 10 per cent of the national beer industry's volume, and UB controls nearly 75 per cent market share in the State, which accounts for substantial portion of the company's profit pool.

"UB's total annual requirement for the Karnataka market is 60 lakh cases, and nearly 45 lakh cases are sourced from KBDL through the existing contract arrangement. The acquisition is in the long-term interest considering KBDL's strategic location, its capacity and the company's market share in the State," the company officials said. It must be mentioned that UB has an own brewery in the State located near Mangalore but with significantly smaller brewing capacity.

The resolution to be put before the shareholders states that "UB will acquire equity stake from existing promoters for an amount not exceeding Rs 180 crore and the source of investment will be the infusion of funds in the form of equity/preference capital by the strategic partner, S&N."

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