India's Mallya Buys Whyte & Mackay for $1.18 Billion (Update2)
By Ashok Bhattacharjee and Peter Woodifield
May 16 (Bloomberg) -- Billionaire Vijay Mallya's distillery group agreed to buy Scottish liquor maker Whyte & Mackay for 595 million pounds ($1.18 billion), extending a record year for international takeovers by Indian companies.
Mallya's United Spirits Ltd., India's biggest liquor maker, will acquire all the shares held by Chairman Vivian Immerman and other investors, the Bangalore-based company said in a release to the Bombay Stock Exchange today. ``The potential for premium Scotch whisky in India is enormous,'' Mallya said.
With the acquisition, Mallya can market Whyte & Mackay's W&M Scotch and Jura single-malt brands in India and China, the world's two fastest-growing major economies. Mallya, who runs an airline named after his Kingfisher beer brand, joins companies including Tata Steel Ltd. and Hindalco Industries Ltd. in making $26 billion of overseas takeovers this year.
``Over the long-term, Whyte & Mackay is a good buy, giving the company global presence,'' said Navneet Munot, who manages $4.1 billion at Birla Sun Life Asset Management Co. in Mumbai. ``With Whyte & Mackay in its fold, United Spirits will strengthen its Scotch portfolio,'' said Munot, who owns shares of United Spirits, the consolidated spirits business of UB Group.
Shares of United Spirits, maker of the McDowell brand of Indian whisky, snapped a three-day losing streak, climbing as much as 8.2 percent, the biggest gain since March 6. The shares rose 6.9 percent to 895.2 rupees at the end of trading on the Bombay Stock Exchange at 3:30 p.m. local time today.
Windfall
The sale generates a windfall for Immerman and brother-in- law Robert Tchenguiz, who led a group of investors paying 200 million pounds for the Glasgow-based liquor maker in 2001.
United Spirits sold the equivalent of 66 million cases of spirits in the year ended March 31, compared with 9 million at 163-year-old Whyte & Mackay, the statement said.
Whyte & Mackay's inventory of 155 million liters of spirits was independently valued at between 350 million pounds and 400 million pounds, Mallya said. The liquor maker's brands, including the Dalmore Single Highland Malt and Vladivar vodka, are worth 170 million pounds to 190 million pounds, he said.
``We've paid a very sensible price for the remaining assets,'' Mallya said. ICICI Bank Ltd. and Citigroup Inc. helped fund the transaction.
Whyte & Mackay owns the Invergordon distillery, with a capacity of producing 40 million liters a year, and four malt whisky distilleries in Scotland, it said. The company's bottling facility in Grangemouth can produce 12 million cases annually.
Merging Business
United Spirits was formed last year by folding McDowell & Co., Shaw Wallace & Co., Herbertsons Ltd. and other liquor makers in the UB Group into a single entity. The company owns 145 brands and is focusing on 40 key brands.
The UB Group has 69 factories across India, where rising disposable incomes and mushrooming of pubs have spawned a new set of spirits buyers.
``India is emerging as an important center for Scotch whisky consumption, with demand for Scotch growing at 30 percent per annum, albeit coming off a very low base,'' Citigroup Global Markets said in a research note to its clients yesterday. ``With Indian consumers trading up from lower-end to high-end whiskies, demand for bulk Scotch for blending with local whisky is also increasing rapidly,'' according to the note that said ``chances of a negative surprise from the acquisition are slim.''
China Growth
The addition of Whyte & Mackay to Mallya's stable of home- grown brands is expected to help the Indian distiller market its products in China, the world's fastest-growing major economy.
``One gaping hole in our portfolio was Scotch whisky,'' Mallya said at a press briefing in Glasgow, Scotland. ``Demand for Scotch whisky is coming back in emerging markets stronger than ever.''
United Spirits this month introduced five products in China, including the most expensive Indian-made whisky Antiquity Blue Rare Premium, its best-selling Bagpiper brand and Premium Romanov Vodka.
China's middle-class liquor-lovers are becoming familiar with imported spirit brands such as Chivas Regal and Martell. That helped the nation become one of the top 10 export markets for Scotches last year with about $115 million worth of imports, a 27 percent gain on 2005, according to the Scotch Whisky Association.
China's 10.7 percent economic growth in 2006, the fastest in 11 years, has boosted incomes and demand for high-end liquor.
bloomberg.com |
