The Hindu Business Line : Mallya's Scotch sense

For the uninitiated, it would seem that Vijay Mallya, the UB group's feisty Chairman, wilted under pressure to buy the fourth largest Scotch whisky maker in the world, Whyte & Mackay, even if it meant paying more than what he had anticipated earlier.

After all, wasn't it the fate of Jet Airways as well, which, according to even Mallya, was left with no choice but to acquire Sahara Airlines eventually? In the case of Mallya, the pressure was of a different kind. He had nearly made it a habit of withdrawing from such high-profile bids such as the one for Sahara and the Champagne Taittinger Group. Because of such near misses, the pressure was building up on UB's flamboyant Chairman to disprove his critics' contention that he enters and exits such bids to attract publicity — the harshest of them all claimed that he does it to drive up his company's stocks as well. But after Mallya actually pulled off the Whyte & Mackay acquisition, he has perhaps more than silenced his many critics for a long time to come. In one fell swoop, Mallya has shown he is, like good whisky, maturing with age. He has got access to plentiful supplies of bulk Scotch whisky which can be imported into India at lower duties than global brands, bottle and launch his own brands and sell at far cheaper prices than foreign Scotch whisky brands.

Analysts aren't exactly singing hosannas but believe that it actually makes a lot of sense for Mallya to have gone in for such an acquisition. "We believe that chances of a negative surprise from the acquisition are slim — our estimates for Whyte & Mackay are based on conservative estimates, and we see higher chances for the acquisition to surprise positively," Citigroup's Princy Singh and Pragati Khadse said in their analysts' report. A former liquor industry professional, who did not want to be named said that Mallya has, in fact, helped United Spirits to prise open the doors to some of the closed markets. "I don't think we should take a short term view of the acquisition. United Spirits will now be able to sell some of its brands in markets which were unreachable so far," said the industry veteran.

But the acquisition took a long time coming. Initially, when the press got wind of it, nobody from the company, including the man himself, went public with the unsolicited offer made for the Scottish company. The earlier failed bids might have prompted Mallya to remain extremely cautious this time. Another point to be considered was that when he bid for the French company Taittinger, the French through their blogs and other media closed ranks to pressurise the company against selling it off to a non-European.

Mallya might have also assumed that the negotiations with Whyte & Mackay would not last as long as they did and that he would, in fact, wrap up the deal sooner. But that was not to be. Whyte & Mackay's owner, Vivian Immerman, who wouldn't admit it at first, afraid that he might attract negative vibes from fellow Scottish distilleries, did acknowledge later a bit grudgingly that Mallya had indeed made an unsolicited offer. But would he sell it? He refused to answer that query then.

With acquisition being the flavour of the season in India, the press started to follow the developments keenly. W & M's Immerman was just a phone call away and one would come back with the impression after questioning him endlessly that either he was playing the waiting game or did not take Mallya seriously. Around the same time, reports from Scotland said two top officials of Whyte & Mackay quit to protest the imminent takeover by an Indian businessman, but Immerman tried to play down the issue by claiming that the officials themselves did not hold important posts in the set-up.

Then the numbers game started. A few reports suggested that Mallya wanted to close the deal at about £475 million while others said Immerman wanted nothing less than £600 million. Mallya also kept claiming he wouldn't give a penny more than what the deal deserved. There were fund managers and rivals who claimed he would only get a handful of foreign private labels but nothing else.

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Mallya's Scotch sense