United Breweries & #39; Brewery Business Demerger Okayed

The board of directors of United Breweries Ltd (UBL) has approved the scheme to demerge its brewery business into a dedicated entity effective August 1, 2001

A press statement from the UB Group said the demerger is aimed at enhancing shareholder value through the creation of a focused brewery company and make it attractive for a strategic partner to pick up a stake in it.

The group plans to sell at least 26 per cent stake in UBL in which the group's chairman Vijya Mallya and his associates have around 42 per cent stake.

The statement said the board has recommended the issue of four new equity shares in the demerged entity for every 10 shares held in United Breweries with a corresponding reduction in the share capital of UBL. The new entity is currently a 100 per cent subsidiary of UBL which holds the brewery-related investments of the parent.

 

It has an equity capital of Rs 2.8 crore comprising 28 lakh equity shares of Rs 10 each. Consequent to the demerger, the equity capital will stand expanded at Rs 18.37 crore comprising 1.83 crore shares of Rs 10 each, and the share capital of UBL will stand reduced to Rs 22.40 crore.

The scheme of demerger, drawn up in accordance with the relevant provisions of the Companies Act, 1956, and the Income Tax Act will be subject to relevant approvals including that of the Karnataka High Court.

The demerged entity would have a level of debt that would be serviceable by its cash flows. It would provide investors with an opportunity and a vehicle to hold their investment separately in UB's brewery business, which was earlier not available.

The group has already initiated the process of inviting a strategic equity partner to be inducted into the new entity for which UBL has appointed Kotak Mahindra Capital Company to manage the process.

The new entity will be a focused brewery company and will carry all the brewery business of the UB Group. For the financial year 2000-01, the UB Group had brewery sales of 25.3 million dozens aggregating around Rs 460 crore.

However, the full impact of the recent acquisitions/investments in the subsidiary companies are likely to be fully realised only from the current financial year.

The statement said the residual UBL will continue to hold the valuable assets which include the controlling stake in India's largest spirits business, and other liquid investments.

Work on development of the company's prime real estate in Bangalore is expected to commence in the next fiscal year, and this will generate a steady revenue stream, the press statement said.