Whyte & Mackay may cost Vijay Mallya $1.38 bn

Whyte & Mackay may cost Vijay Mallya $1.38 bn

Irene Shen, Bloomberg

Shanghai: UB Group, the world’s third-largest spirits maker, has been asked to pay 700 million pounds ($1.38 billion or Rs5,719 crore) for Scotland’s Whyte & Mackay, the Indian distiller’s owner, Vijay Mallya, said today.

“I don’t like to overpay for anything," Mallya said in an interview in Shanghai today. “If we buy, we buy at the right price." Bangalore-based UB will decide how much it’s willing to pay within two weeks, he said.

In March, UB Chief Financial Officer Ravi Nedungadi said United Spirits Ltd, a unit of the Indian distiller, would buy all of Glasgow-based Whyte & Mackay, owned by Chairman Vivian Immerman and his brother-in-law Robert Tchenguiz. While Nedungadi didn’t disclose the price, media reports of a 550 million pound acquisition were not “off the mark," he said.

Mallya, who runs a low-cost airline named after his biggest selling beer brand Kingfisher, is adding international brands and a global sales network to compete with rivals such as Seagram Co. and Bacardi Ltd. The acquisition would extend a record year for takeovers involving Indian companies.

Whyte & Mackay was acquired by Immerman, Tchenguiz and investors including West LB in 2001 for 208 million pounds. Both Immerman and Tchenguiz took full control of the company in June 2005.

Founded in 1844, White & Mackay produces W&M scotch whisky, the Dalmore Single Highland Malt, Vladivar vodka and Jura single- malt scotch.

Into China

The Indian billionaire was speaking at the launch of UB products in China, aiming to replicate the success of Pernod Ricard SA and other liquor sellers in the world’s fastest-growing major economy.

United Spirits today introduced five products, including the most expensive Indian-made whisky Antiquity Blue Rare Premium, its best-selling Bagpiper brand and Premium Romanov Vodka.

China’s middle-class liquor-lovers are becoming familiar with imported spirit brands like Chivas Regal and Martell. That helped the nation become one of the top 10 export markets for scotches last year with about $115 million worth of imports, a 27 percent gain on 2005, according to the Scotch Whisky Association.

“Large scotch makers have started conserving stock for anticipated demand in India and China," Mallya said. “China’s market is so attractive and so large that we’ll invest as much as we have to."

UB Group will consider partnerships or acquisitions in China to expand its network, Mallya said.

China Demand

Increasing demand has boosted overseas distillers’ confidence in the Chinese market, encouraging them to expand sales networks and investment. China is set to surpass Japan as the world’s second-largest spirits maker by value with sales estimated at $11.4 billion this year, according to Diageo Plc.

Diageo, the world’s largest liquor maker and producer of Johnnie Walker whisky, last December agreed to buy a 43% stake in the parent of Sichuan Swellfun Co. to tap demand for alcohol in the world’s most populous country.

Growth in Chinese sales helped boost Pernod’s third-quarter revenue.

United Spirits was formed last year by folding McDowell & Co., Shaw Wallace & Co., Herbertsons Ltd. and other spirit companies in the UB Group into a single entity. The company owns 145 brands and is focusing on 40 key brands. It has 69 factories across India.

The company forecast to sell 120 million to 130 million cases of spirits this year, UB’s Nedungadi said on 20 March.

China’s 10.7% economic growth in 2006, the fastest in 11 years, has boosted incomes and demand for high-end liquor.

Fiery Spirits

Shares of Swellfun and Kweichow Moutai Co., producers of China’s most expensive fiery spirits, were among the best performers last year. The two companies’ stock almost quadrupled in value in 2006, while the benchmark CSI Index more than doubled.

Kweichow Moutai, the maker of a fiery spirit used at official Chinese government banquets to toast visiting dignitaries, raised prices in March by 12% on growing demand. Moutai’s sales growth averaged about 30% in the past five years.

The company plans to boost capacity by 2,000 tons a year by 2008, having earmarked 844.6 million yuan to build a new plant that will contribute 1 billion yuan in annual sales and 330 million yuan in profit, the company said last November.

China’s 2006 liquor sales increased 31% from a year earlier to 97 billion yuan, according to the nation’s liquor industry association.

Mallya ranks 31 in the list of Forbes Asia’s richest individuals in India, with his wealth estimated at $1.3 billion.