To pay Rs 4,784 crore for Scotch whisky distiller.
Liquor baron Vijay Mallya today put the cork on months of speculation by announcing the purchase of Glasgow-based Scotch whisky distiller Whyte & Mackay for £595 million (Rs 4,784 crore).
Mallya’s United Spirits, India’s largest liquor firm and the flagship of his UB Group, will now own all the shares held by W&M Chairman Vivian Immerman and other investors.
That will give the Indian company an annual output of 75 million cases, and it will remain the third largest in the world in terms of number of cases produced, behind Diageo and Pernod-Ricard SA.
Mallya, chairman, UB Group, said at a video conference from Glasgow that the 140 brands owned by the company, including Whyte & Mackay, Isle of Jura, The Dalmore and Vladivar vodka, had been independently valued at £170-190 million.
The distiller’s brands will be sold in India, China and Russia. Besides, the firm’s Scotch will be used to blend whisky in India.
The deal is estimated at 21 times historical EBITDA (earnings before interest, tax and depreciation) for the year ended September 2006, a premium to those of peers Diageo and Pernod-Ricard.
CHEERS FOR THE NUMBERS
UNITED SPIRITS’S EBIDTA
FY 07
FY06
Rs 491.38 crore
Rs 258.75 crore
-90.30%
FIRM’S Profit to sales
FY07
FY 06
5.50%
4%
India's spirits industry
FY 07
FY 06
FY 05
150 million cases
133 million cases
124 million cases
-12.78%
-7.26%
(Figures in bracket indicates % growth)
* In FY 07 United Spirits with 66 million cases, was the third largest after Diageo at 90 million cases and Seagram at 77 million cases. With W&M, USL will have total sales of 75 million cases.
* On the list of the world's top 15 liquor brands in calendar 2006 McDowell's No 1 was ranked the third fastest growing brand with a growth of 42.5%. Old Tavern was ranked No 4 (36.4%), Bagpiper was ranked No 10 (23.5%) and McDowell's Celebration was No 15 (13.8%)
Analysts, however, believe the premium is justified and inevitable, given the growing demand for Scotch whisky worldwide and the fact that not too many distillers are up for sale.
The acquisition gives the Rs 2,712-crore United Spirits access to an inventory of 115 million litres of Scotch whisky and brands that will fill a gap in its liquor portfolio.
The stock markets cheered the deal by pushing up the company’s stock price by 6.8 per cent to Rs 895.20 at close today.
The combined turnover of United Spirits and Whyte & Mackay in the current year may touch Rs 4,700 crore and the combined operating profit, Rs 750 crore.
The deal will be financed through a combination of borrowings from Citibank (£310 million) and ICICI Bank (£ 325 million). A part of this debt, £325 million, is to be raised in Whyte & Mackay without recourse to United Spirits.
Ravi Nedungadi, president and CFO of the UB group, said arrangements had been made by the sellers to provide for £18 million, which was the deficit in the pension fund.
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