Mallya buys Whyte & Mackay for $1.18 bn

Vijay Mallya, chairman of the UB Group, on Wednesday said its flagship United Spirits Ltd had acquired 100 per cent of Scotch distillers Whyte & Mackay for £ 595 million ($1.18 billion), an all-cash acquisition announced to the Bombay Stock Exchange that sent the company's shares up as much as 6.4 per cent.

Last-minute negotiations brought the price down from £ 610, which insiders had until the morning maintained was demanded by the Whyte & Mackay board. Thus Mallya became the first Indian to enter the world of Scotch, after months of difficult negotiations and sometimes frustrating bargaining.

United Spirits has 60 per cent of the Indian market and plans to introduce Whyte & Mackay's brands into India immediately. " Until today, the only missing link in our portfolio has been Scotch and due to the shortage and rapidly increasing prices of Scotch whisky, we needed a reliable supply source," Mallya said.

"Given the valuable Scotch whisky inventories and production assets, a significant part of the acquisition debt is in the target with no recourse to United Spirits. I am satisfied that the price agreed is attractive. 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," Mallya added.

Whyte & Mackay’s bulk scotch inventories of 115 million litres are not only valuable but allow United Spirits the opportunity to meet its growing requirements for brands like The Dalmore, Isle of Jura, Glayva, Fettercairn, Vladivar vodka and the eponymous Whyte & Mackay blended Scotch. The company also owns several other Scotch whisky brands such as Mackinlays, John Barr, Cluny and Claymore.

Whyte & Mackay posted sales of 9 million cases and case equivalents in the last 12 months. United Spirits notched up sales of 66 million cases for the year ended on March 31, 2007. With this acquisition, United Spirits will have consolidated sales of 75 million cases per annum.

Vivian Imerman, who in the last four years presided over strong revenue and profit growth, and his brother-in-law Robert Tchenguiz had taken control of the Glasgow-based Whyte & Mackay two years ago. Immerman had been part of a group of investors who paid £208 million for the company in 2001. Imerman will remain with the Whyte & Mackay group as strategic adviser to Chairman and Chief Executive Mallya.

"With the UB Group’s ability to sell and market brands, Whyte & Mackay will be taken to a new level again. The annual operating income of Whyte & Mackay is now approximately £50 million and I expect it to grow at the rate of 20 per cent plus, per annum, for the foreseeable future while the revenue line has grown by 30 per cent in the current year," Imerman said.

Asked whether he would now move for listing on the London Stock Exchange, Mallya said: "It makes sense and looks attractive. I will be definitely looking at it. But there is no definite time schedule."

United Spirits was advised by UBS, ICICI Bank and Standard Chartered, while Whyte & Mackay was advised by Citigroup. ICICI Bank and Citibank arranged the funds for the deal.