United Spirits acquires Balaji Distilleries in all stock deal
02 Dec 2008
Mumbai: Vijay Mallya-led UB Group's spirits arm United Spirits has acquired the Tamil Nadu-based Balaji Distilleries in an all-stock deal.
The merger, effective from 1 April 2009, was finalised in a swap ratio of 2:55, i.e. every two shares of United Spirits for 55 shares held in Balaji Distilleries.
UB Group chairman Vijay Mallya said, "The merger would de-risk USL's significant earnings in an important market and would give United Breweries the strategic advantage to consolidate the group's leadership position in a large and growing state," he said.
Under the purview of the Board for Industrial and Financial Reconstruction, Balaji Distilleries has been a contract manufacturer for UB group ever since it was set up twenty five years ago in 1983. It has a distillery capacity of 10 million cases per annum and brewing capacity of 9 million dozens per annum.
Tamil Nadu accounts for 15 per cent of the company's domestic revenues and ranks fifth in terms of contribution to the company's profits. It is the only state where the company did not have its own production facility due to regulatory constraints.
United Spirits produces over 140 brands in different flavours. The company accounts for 60 per cent of the company's beer volumes in Tamil Nadu where United Spirits is a market leader with a 59 per cent market share.
The stock of United Spirit reacted positively to the announcement and was up by 3.3 per cent in the initial hours of trade. However later it gave up some gains.
Balaji Distilleries was able to post a net profit of Rs 32 crore for the second quarter of the current year, as compared with Rs 12 crore in the comparable period of last year, a 166 per cent rise. This was after the company received Rs 30-crore as 'exceptional income' from a resolution of a dispute with the Rajasthan State Electricity Board (RSEB).
The windfall will help the company to partly wipe out accumulated losses, which as of September 30, stood at Rs 311 crore.
The company expects to come out of the purview of the Board for Industrial and Financial Reconstruction (BIFR) by March 2010.
The company produces a range of liquors and beers from its distillery in Nellore, Andhra Pradesh, and brewery at Tiruvallur, near Chennai. In the first half of the current year, it sold 46.85 lakh cases of liquors (40.84 lakh in same period last year) and 45.27 lakh cases of beer (41.23 lakh cases).