United Spirits slips after Diageo offers to sell W&M whisky biz

United Spirits fell 1.85% to Rs 2,572.50 at 10:20 IST on BSE after Diageo offered to sell a majority of the Whyte & Mackay whisky business due to competition concerns in the UK.

Meanwhile, the BSE Sensex was down 67.68 points, or 0.33%, to 20,537.40.

Trading volumes spurted in the counter. On BSE, 60.98 lakh shares were traded in the counter compared with average volume of 1.50 lakh shares in the past one quarter.

The counter was quite volatile in early trade. The stock rose 1.54% at the day's a high of Rs 2,661.20 so far during the day. It tumbled 8.43% at the day's low of Rs 2,400 so far during the day.

The stock hit a record high of Rs 2815 on 18 July 2013. The stock hit a 52-week low of Rs 1708.20 on 5 April 2013.

The stock had outperformed the market over the past one month till 25 November 2013, falling 0.13% compared with the Sensex's 0.38% fall. The scrip had also outperformed the market in past one quarter, rising 18.68% as against Sensex's 11.26% rise.

The large-cap company has an equity capital of Rs 145.33 crore. Face value per share is Rs 10.

Diageo has offered to sell a majority of the Whyte & Mackay (W&M) whisky business after the UK's competition authority, the Office of Fair Trading (OFT), raised concerns about the impact of its acquisition of United Spirits (USL) on whisky prices in the UK.

OFT said the merger this year between Diageo and USL may lead to whisky price increases in the UK because Diageo, the world's biggest distiller, and W&M controlled a significant part of the market.

It has been ruled that Diageo's ownership of W&M will substantially reduce that competition, and potentially cause price increases for retailers.

As a result, Diageo has offered to sell the majority of its W&M business. OFT said in a statement that the divestment of Whyte & Mackay would include the entirety of the W&M business with the exception of (1) the Dalmore and Tamnavulin malt distilleries (including assets used to run those distilleries), (2) the Dalmore and Tamnavulin brands and maturing inventory from these distilleries as well as associated management and operations; (3) the management and staff for each distillery as well as any supply arrangements specifically associated with either production at the sites and (4) sale of product from the sites. As such the proposed undertakings in lieu of a reference will cover all of W&M's blended Scotch whisky brands including W&M as well as W&M's private label operations. W&M will retain its malt distilleries at Jura and Fettercairn and the Invergordon grain distillery, the statement added.

OFT said that its duty to refer the merger to the Competition Commission is suspended till it finishes considering Diageo's W&M offer.

United Spirits announced after market hours on Monday, 25 November 2013, that its board will consider the OFT announcement and determine further course of action in this regard.

The United Breweries (UB) group acquired W&M for 595 million pound sterling in 2007. Media reports suggested that the sale of W&M would help reduce the debt on USL's books, currently at more than Rs 7000 crore.

USL's net profit surged 273% to Rs 94.30 crore on 7% growth in revenue to Rs 2038.70 crore in Q2 September 2013 over Q2 September 2012.

USL is the largest alcohol beverage company in India selling 123.70 million cases for the fiscal ending 31 March 2013.

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