UB Group eyeing major overseas acquisitions

UB Group, India's largest alcoholic spirits manufacturer, is reportedly planning major acquisitions in Europe to expand its spirits business to overseas markets. Total acquisitions may cost the group well in excess of Rs10,000 crore. It is not clear how the acquisitions would be financed.

New agency reports quoting UB group head Vijay Mallya suggests that the group has initiated a move to acquire a major company in Europe. This deal may cost around $2 billion. The group is also eyeing another smaller company which may cost around $400-$500 million.

McDowell & Company is the flagship company of the UB Group. Last year the group acquired McDowell's main competitor Shaw Wallace for around Rs1,550 crore, creating a near monopoly. The main competitors of UB in the domestic market are multinational players like Seagram.

The alcoholic spirits businesses of UB Group — McDowell, Shaw Wallace and other smaller companies — are being merged into a single company, to be called United Spirits. There are unconfirmed reports that the group is planning an overseas issue of equity by diluting around 15-20 per cent of its capital base. The group is also the market leader in the beer business, where it has a joint venture with Scottish & Newcastle.

UB Group has recently ventured into the domestic airline business as well with its value airline Kingfisher. The airline has ambitious growth plans and has ordered a large number of jets from Airbus.

UB is the world's third largest liquor group in volume sales after Diageo and Pernord Ricard. If the planned acquisitions are successful, the group would become the second largest after Diageo.

McDowell closed at Rs590.85 (up 1.41 per cent) on the NSE yesterday.