The Buying of Scotland's Whyte & Mackay

Billionaire Vijay Mallya's UB Group is set to buy Scotland's Whyte & Mackay ``in a few weeks'' to tap the growing market for whisky in India, UB Group Chief Financial Officer Ravi Nedungadi said.

Unit United Spirits Ltd. will buy all of Glasgow-based Whyte & Mackay, owned by Chairman Vivian Immerman and his brother-in-law Robert Tchenguiz, Nedungadi said yesterday in an interview in Bangalore, where UB Group is based. While Nedungadi didn't disclose the price, media reports of a 550 million pound ($1.08 billion) acquisition are not ``off the mark,'' he said.

Mallya, who runs a low-cost airline named after his biggest selling beer brand Kingfisher, is adding international brands and a global sales network to compete with rivals such as Seagram Co. and Bacardi Ltd. India's whisky market is growing at least 10 percent a year as the fastest wage growth in Asia gives consumers more to spend on luxury brands. The acquisition would extend a record year for takeovers involving Indian companies.

``Indian companies are getting the confidence to go global,'' said Nikhil Vora, an analyst at SSKI Securities Ltd. in Mumbai. ``While earnings get diluted in the first few years, in the long term it makes sense and is the right way to go.''

Half of the purchase will be funded by a loan backed by Whyte & Mackay assets, with the remainder borrowed against about $250 million of United Spirits stock, Nedungadi said.

Scotch Blend

United Spirits will sell 66 million cases of spirits this year in India out of a total forecast of 120 million to 130 million cases, Nedungadi said. United Spirits also uses scotch for blending its local whiskies.

``We're acquiring the distilleries and the brands that are there,'' Nedungadi said. ``It's an extensive business. Our intent is to get in as soon as we can.''

The UB Group started its due diligence of Whyte & Mackay, aiming to buy the Scottish spirits maker for a reported value of 550 million pounds ($1.1 billion), the Business Standard said on Feb. 22, citing UB group official P.A. Murali.

Mallya ranks 31 in the list of Forbes Asia's richest individuals in India, with his wealth estimated at $1.3 billion.

``We are very clear we are doing it with an eye on the Indian consumer and the market,'' Nedungadi said. ``Two-thirds or more of all the Indian alcohol consumed in this country is whisky. With growing disposable incomes and more consumers coming into the market, we think there will be a large demand for scotch going forward.''

Acquisitions

Mallya's move comes two months after India's Tata Steel Ltd. agreed to buy U.K's Corus Group Plc for 6.2 billion pounds ($12.2 billion) in the largest acquisition by an Indian company. Vodafone Group Plc. last month agreed to acquire Hutchison Telecommunication International Ltd.'s 67 percent stake in Hutchison Essar Ltd. for $11.1 billion.

Shares of the parent United Breweries Holdings Ltd. increased 5.68 percent in the past year, compared with a 19.55 percent increase in India's benchmark Sensitive Index. The shares of United Breweries Holdings fell 1 percent to 357 rupees as of 12:25 p.m. on the Bombay Stock Exchange.

Whyte & Mackay was acquired by Immerman, Tchenguiz and investors including West LB in 2001 for 208 million pounds. Both Immerman and Tchenguiz took full control of the company in June 2005.

White & Mackay, founded in 1844, produces W&M scotch whisky, the Dalmore Single Highland Malt, Vladivar vodka and Jura single-malt scotch.

source:www.bloomberg.com