United Spirits to sell Whyte & Mackay to Philippines-based Emperador for $729 mn
10 May 2014
United Spirits Ltd, India's largest spirits company, yesterday struck a deal to sell its Whyte & Mackay scotch whisky unit to Philippines-based Emperador Inc for $729 million (£430 million) in order to ease UK antitrust concerns.
United Spirits, formerly controlled by Vijay Mallya, has been forced to sell Whyte & Mackay after Diageo Plc proposed to acquire a majority 53.4 per cent stake iin the Indian spirits maker in a $2.05 billion deal n 2012. (See: Diageo to acquire 53.4 % in United Spirits for Rs11,165 crore)
Britain's competition authority, The Office of Fair Trading had said the deal may lead to a substantial lessening of competition in the supply of blended whisky in the UK to retailers.
Both Diageo and Whyte & Mackay are leading suppliers of blended bottled whisky in the UK, especially to supermarkets and other large retailers.
The sale would require approvals from both the UK and Indian regulators, as well as from the Reserve Bank of India since the deal would result in a significant write off of loan amounts recoverable by United Spirits from its UK subsidiary.
In 2007, the then Vijay Mallya-led United Spirits had snapped up Whyte & Mackay for about £595 million (Rs5,000 crore).
Whyte & Mackay has brands that include single malts like The Dalmore, Isle of Jura, Fettercairn, whisky-based liqueur Glayva, Vladivar vodka and Whyte & Mackay blended Scotch, and a distribution network in over 50 countries.
''Whyte and Mackay is a prized asset with excellent growth opportunity and its acquisition is in line with our plans to enhance our product portfolio,'' said, Andrew Tan, chairman of Emperador.
Several companies had expressed interest in buying Whyte, including a former chairman of the scotch-maker.
The company started addressing competition concerns which happed after the Diageo's acquisition of a 28.78 per cent stake in United Spirits, till then fully controlled by liquor baron and failed airline entrepreneur Vijay Mallya.
The deal with Emperador included all the five distilleries owned by W&M. The enterprise value includes the company's current debt and its pension benefits.
W&M was bought in 2009 by Vijay Mallya for £595 million. The acquisition has allowed USL access to large scotch reserves for its blended whiskies.
Analysts are hopeful that the sale will lower USL debt, which was Rs7,579 crore in the December quarter.
"United Spirits UK has approved the sale and entered into the share sale and purchase agreement with Emperador UK and Emperador," the company said in a communication to stock exchanges. The deal includes an agreement that W&M would continue supplying scotch to USL for three years.
"The sale is subject to necessary Indian and UK regulatory approvals and shareholder approvals, including an approval by the Reserve Bank of India since the sale will result in a significant write down of loan amounts recoverable by the company from its overseas subsidiary," Emperador, owned by the Alliance Global Group, said in a separate statement.
