USL sells Whyte & Mackay for Rs 4,345 cr

Emperador buys whisky maker; deal will need RBI nod to write off loan to W&M

Don't want to miss the best from Business Standard?

Diageo-controlled United Spirits Ltd (USL) on Friday said it would sell Whyte & Mackay Group, a manufacturer of whisky, to the Philippines-based brandy manufacturer Emperador Inc for £430 million (Rs 4,345 crore).

The board of USL, at a meeting here on Friday, decided to sell the entire issued share capital of Whyte & Mackay Group to Emperador UK, a subsidiary of Emperador, a unit of Alliance Global, the world’s largest maker of brandy.

The Vijay Mallya-led USL had bought Whyte & Mackay in 2007 for £600 million.

The share sale is subject to the conditions set out in a share sale and purchase agreement between United Spirits (Great Britain), Emperador UK and Emperador and an associated tax deed.

RAISING A TOAST

• United Spirits (Great Britain) has approved the sale and entered into the share sale and purchase pact with Emperador UK and Emperador Inc
• Under the agreement, Emperador has agreed to supply whisky to United Spirits Ltd for three years

Rothschild, Standard Chartered Bank and Rabobank advised USL. Herbert Smith Freehills and Amarchand Mangaldas acted as legal advisors.

In January, the board of USL had initiated a process to explore a potential sale of Whyte & Mackay.

Apart from approvals from the UK and Indian regulators, the deal will require approval from the Reserve Bank as the sale would result in a significant write-off of loan amounts recoverable by USL from UK subsidiary.

"USL may have given loans to W&M in foreign currency, which they now have to write off, for which they need Indian central bank's approval," said a banker.

Mallya’s grounded carrier Kingfisher Airlines has dues of Rs 6,000 crore to banks, now classified as non-performing assets.  Bankers had opposed the transaction to sell USL's stake to Diageo, but the Supreme Court ordered a status quo. "We are yet to take a call on our stance on Emperador deal. State Bank of India, the consortium lender, will have to call a meeting to decide on the future course of action," said an official from a public sector bank with an exposure to the airline.

In a filing to the Bombay Stock Exchange (BSE), USL said it had made a recommendation to the board of subsidiary United Spirits (Great Britain) to consider the sale of the entire share capital of Whyte & Mackay.

“I am proud of what Whyte & Mackay had achieved under USL. I am delighted to be able to pass on Whyte & Mackay into the hands of a new owner, committed to realising the full potential of the business and whose vision for Whyte & Mackay is aligned with USL’s,” said Vijay Mallya, chairman of USL.

United Spirits (Great Britain) has approved the sale and entered into the share sale and purchase agreement with Emperador UK and Emperador. Under the agreement, Emperador has agreed to supply whisky to USL for three years from the date of sale.

Andrew Tan, chairman of Emperador, said, “Whisky is the second-fastest growing spirits segment in the world next to brandy. With this acquisition, Emperador will be exposed to two of the fastest-growing spirits segments in the world. The global demand for Scotch whisky has shown strong growth over recent years and is expected to continue this momentum. We are continuously looking to enhance shareholder value through earnings accretive investments.”

“We believe Whyte & Mackay’s acquisition is in line with our plans to enhance our product portfolio. Whyte & Mackay has a global distribution in 50 countries.”

Since Diageo bought a controlling 29 per cent stake in USL, the two had worked together on several issues. Diageo had voluntarily offered to sell a significant portion of Whyte & Makcay to allay competition concerns being probed by the UK's Office of Fair Trade.

In addition, the sale is subject to necessary Indian and UK regulatory approvals and shareholder approvals, including those by the Reserve Bank of India, since the sale will result in a significant write-off of loan amounts recoverable by the company from its overseas subsidiary.

Vijay Mallya-led USL had bought Whyte & Mackay in 2007 for close to 600 million pounds.