Scottish, Ub Assessing Brewing Deals

Some of the leading brands of Scottish & NewCastle, which recently tied up with the UB Group, are expected to be brewed in India, while Kingfisher may be brewed in one of the breweries of the UK-based beer company.

A top official of the UB group said the UK-based beer company, Scottish & NewCastle has offered its Kronenbourg lager beer and NewCastle ale to be produced and marketed in India.

In return, UB's flagship brand, which is brewed under a contract arrangement in the UK, may be brewed in one of the breweries of Scottish & NewCastle.

In another development, UB Group and San Miguel Corporation are expected to end their relationship following the agreement entered into between UB and Scottish & NewCastle.

San Miguel had earlier informed the UB Group management that in case it ties up with another beer company, it will have to break its licensing arrangement with the Bangalore-based beer major.

The UB Group's association with San Miguel began after it took over Associated Breweries & Distilleries Pvt Ltd (ABD) with which it had entered into an agreement.

The official said that Presitge Group had been awarded the licence to develop its land in Bangalore on which the UB headquarters and a brewery is located. He said 55 per cent of the 800, 000 sq ft floor area will be given to the UB group and the rest to the Prestige group.

As per the arrangement between UB Group and Scottish & NewCastle, the Indian beer company does not have to pay any cash upfront but gets to use Rs 250 crore to wipe off most of its debt at a nominal interest of 5 per cent annually.

In case it does not want to give away its stake to Scottish and NewCastle, it can give back the cash which it can do so through sale of its non-core assets and internal accruals. The UB Group has the right to exercise its option in five years' time-frame.

In the case of the special purpose vehicle, UB does not have to pay cash upfront while Scottish and Newcastle has put in around Rs 175 crore which can be used to go shopping for breweries and brands.

Both UB and the English company have 40 per cent stake in the company while Ravi Jain's Millennium Alcobev Ltd will have 20 per cent stake. UB's economic interest in Inertia and MABL will now go into the special purpose vehicle.

In the case of Scottish & NewCastle, the English beer manufacturer gets a foothold in an emerging market because it currently operates in a matured and saturated market. The company also gets a chance to enter the new market in a phased manner.