The Hindu Business Line : A year to remember for Mallya

Heady year
UB group snaps up Scotch maker Whyte & Mackay for £595 million.
SAB Miller increases beer market share to 36-38 per cent.
UB group launches its own wine brands.

K. Giriprakash

Bangalore, Dec. 27 The year 2007 will perhaps go down as one of the best for the Vijay Mallya-owned UB Group.

He was able to acquire companies he set sights on, which made him part of the front page of newspapers throughout the year. The year started off with the acquisition of Scotch maker Whyte & Mackay for £595 million. After tasting failure with a potential acquisition of the Taittinger Group and with Air Sahara during the previous year, Mr Mallya had done enough homework to get it right this time.

The initial reluctance on the part of Whyte & Mackay brand owners finally gave way and the UB Group was able to get its hands on about 140 labels of the Scottish company. The group also got hold of 115 million litres of raw Scotch which the analysts believe was the smartest part of the entire deal. Some months later, the Indian Government reduced the duty structure on liquor import and coming on the back of the Whyte & Mackay deal, it turned out to be good news for the UB Group.

The big one was of course the part acquisition of Deccan Aviation after days of speculation. The Deccan Aviation Managing Director, Capt G.R. Gopinath, kept denying that any bid had been made for his airline group but a growing debt burden must have eventually forced the pioneer of low-cost airline in the country to succumb to the offer. The eventual merger happened, in a roundabout manner, but it again showed the business acumen of Mr Mallya.

Mr Mallya, according to analysts, clearly saw a growing threat from Deccan which was fast expanding its network as well as its fleet. His only option was to acquire the company before others could but the entire process of merging his airline with Deccan Aviation was carried out with kid gloves.

The UB Group has enough debt on its balance sheet and so are the combined losses of both the airlines. The tough part, in fact, starts now and remains to be seen how the brains trust of the UB Group plans to achieve the financial milestones one after another.

Overseas competition

The UB Group could also see competition from foreign liquor companies as they make their foray into India. SAB Miller is actively looking for acquisitions and has been able to quietly increase its share of the beer market to about 36-38 per cent compared with about 49 per cent of United Breweries.

Beer brands such as Budweiser, Carlsberg and Guinness might start giving some serious competition to the established brands and there are more beer brands which are just round the corner. The Khodays, who have been quiet for a long time, dusted themselves up, and are already eyeing brands in Scotland and want to expand their operations overseas.

The wine industry too is seeing some action with the UB Group launching its own brands as well as those of its recently acquired Bouvet Ladubay from the Taittinger Group. Surely, the year 2008 will perhaps be another important year for the liquor industry with more launches and more acquisitions.

More Stories on : Mergers & Acquisitions | Breweries | Airlines

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