Acquisition plugs a `missing link' in the UB's product portfolio

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MumbaiMay 16After months of being fodder for whisper columns, Scottish spirits maker Whyte & Mackay, popularly identified by its iconic double red lion symbol, is finally part of the United Breweries (UB) Group. United Spirits Ltd (USL), the flagship of the UB Group, has acquired 100 per cent equity in Whyte & Mackay for 595 million (about Rs 4,783 crore), with the deal being sealed on Wednesday morning in Glasgow, Scotland.

Increasing Prices

The acquisition plugs a "missing link" in the UB product portfolio by giving the company the strong presence it needed in the scotch whiskey market, said UB Group Chairman, Mr Vijay Mallya, speaking to the Indian media from Glasgow.

The acquisition pushes USL's consolidated sales up to 75 million cases per annum. USL closed 2006-07 at 66.4 million cases, he said. "Until today, the only missing link in our portfolio has been Scotch and due to the shortages and rapidly increasing prices of Scotch Whisky, we needed a reliable supply source to secure our future considering that we use scotch in our Indian blends. The potential for premium Scotch Whisky in India is enormous and, with the acquisition of Whyte & Mackay we now have a strong portfolio of internationally recognised brands that we will immediately introduce into the Indian market and use our strong distribution muscle fully to our advantage. In addition we now have access to international distribution and can look forward to exporting our brands from India," he said.

Product Portfolio

Whyte & Mackay recorded sales of 9 million case and case equivalents in the last 12 months. The leading Scotch whiskey distiller owns brands including The Dalmore, Isle of Jura, Glayva, Fettercairn, Viadivar vodka and Whyte & Mackay blended Scotch.

The company has 140 brands, some dormant, but that can be revived, he said. USL will look to bring the W&M brands into India and China and there will be a revamp of the product portfolio depending on the requirements of these markets, he said.

Global demand for Scotch whisky is showing strong growth and prices are increasing rapidly, Dr Mallya said. W&M's bulk scotch inventories of 115 million litres will allow USL the opportunity to meet their growing requirements for their brands in India.

Financial Details

Explaining the corporate structure of the deal, Mr Mallya said that W&M is a 100 per cent subsidiary of USL, through an intermediary holding company established for the purpose. Acquisition finance for the transaction to United Spirits was provided by ICICI Bank and Citibank. The debt of 325 million was extended by ICICI to the intermediary holding company, while 310 million was extended by Citibank to USL, said the UB Group President (finance), Mr Ravi Nedungadi.

In the day of consolidated statements, these financial details would be reflected in the company's accounts, he added. "I have repeatedly stated that we will not over pay in any acquisition and I am satisfied that the price agreed is attractive. Further, the combined profits of United Spirits and Whyte & Mackay are expected to be earnings accretive from the first completed year of operations after accounting for the cost of funds applied to the acquisition," Mr Mallya said.

Mr Vivian Imerman, Chairman and Chief Executive Officer and majority shareholder in W&M, will remain in the group as a Strategic Advisor to Mr Mallya. The acquisition brings into USL's fold The Invergordon Distillery, near Inverness. W&M also owns four malt whisky distilleries in Scotland and a bottling facility in Grangemouth.

United Spirits shares closed at Rs 895.20, up 6.88 per cent, on BSE on Wednesday.

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(This article was published in the Business Line print edition dated May 17, 2007)
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