The Hindu Business Line : UB to buy 54 pc stake in Shaw Wallace for Rs 1,300 cr

IT may finally be time to pop the bubbly for the Bangalore-based alcoholic beverages company, the UB group. McDowell & Company Ltd, a group company, has inked an agreement with Jumbo World Holdings Ltd to acquire indirect control up to 54.54 per cent stake in Shaw Wallace and Company Ltd (SWC) from Jumbo.

This, along with related transactions between the two companies, was done at a total consideration of $300 million or an estimated Rs 1,300 crore, a UB communication on Monday said.

McDowell and Jumbo have reached a binding agreement for McDowell and its associates to acquire indirect control of SWC from Chhabria's Jumbo, the note explained. In related transactions, McDowell has also agreed to purchase certain other affiliates of the Jumbo group which are engaged in the distribution of spirits in India and globally, it added.

With this transaction, the UB group will indeed become the `King of good times', as it will have a significant share of the Indian spirits business that has an annual sale of about 60 million cases. The UB group's market share in IMFL (Indian-made foreign liquor) is expected to go up from 40 per cent to over 50 per cent, said an analyst.

Today's deal makes UB the second among global spirit companies.

The purchase price under the agreement works out to Rs 325 per SWC share, which includes a fee for worldwide non-compete undertakings, the note said. McDowell and associates propose to revise the open offer for SWC shares to reflect a change of control pursuant to the proposed acquisition.

Accordingly, the offer price has been increased from Rs 250 per share to Rs 260 per share.

This adjusts for the non-compete fee as permitted by the current SEBI regulations, the note explained.

Shaw Wallace is primarily engaged in the spirits business comprising both IMFL and country liquor.

Additionally, it has holdings in other businesses too, including majority control in Narmada Gelatines, a listed company.

This will be divested to a Jumbo affiliate as soon as possible to maintain Jumbo's management control, the note said.

The UB group Chairman, Mr Vijay Mallya, has been quoted in the note saying that the transaction was a culmination of a long journey, which would benefit the shareholders of McDowell and Shaw Wallace.

The economies of scale would result in significant cost advantages to the company and a variety of choices to the consumers.

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