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In
May 2007, United Spirits Ltd., a part of the United Breweries (UB)
Group1 of India promoted by Vijay Mallya (Mallya), acquired a 100
% stake Scottish company Whyte & Mackay Ltd. (W&M) for ₤595
million.2 As a result of the acquisition, United Spirits overtook Pernod-Ricard SA of France to become the second largest liquor
company in the world (in terms of total sales), behind Diageo
Plc of UK.3
Mallya had entered into negotiations with the management of W&M
in mid-2006 for the acquisition.
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His original bid was £400 million, which he
eventually hiked to £595 million – an increase of 48.75% on the original
bid.
W&M, which was a privately held company, had been the fourth largest
manufacturer of Scotch whisky in the world, and it was estimated that
the company produced nearly 10% of the world's Scotch whisky.4 W&M had a
strong brand portfolio, including brands like The Dalmore, Isle of Jura,
Glayva, Fettercairn, Whyte & Mackay blended Scotch and Vladivar vodka.
The company had sold nine million cases of liquor in 2006.5
After the acquisition, Mallya became the Chairman and Chief Executive
officer (CEO) of W&M, while Vivian Imerman (Imerman), who had headed W&M
before the acquisition, took up the position of Strategic Advisor to the
Chairman and CEO. Mallya said that the acquisition would not result in
any job cuts at W&M, and announced that the company wanted to invest
significantly in Scotland.
A joint press release by United Spirits and W&M after the acquisition
said that the UB Group would provide access to W&M into Indian and other
emerging markets, allowing an acceleration of the company's growth
plans.
Through the acquisition of W&M, United Spirits came to own the world's
largest grain distillery, a bottling unit, and a bulk Scotch inventory
of 115 million liters, which was valued at ₤380 million.
Before the acquisition, United Spirits sourced Scotch from manufacturers
like Diageo and W&M to blend with its domestic whisky in order to make
premium whisky. (In 2006, it sourced about 18 million liters of bulk
Scotch mainly from Diageo and Pernod-Ricard.6) The acquisition of W&M
therefore ensured that United Spirits would have a steady supply of bulk
Scotch.
Although some analysts felt that United Spirits had overpaid for W&M,
Mallya insisted that the acquisition made good business sense for the
company as there was considerable demand for premium Scotch whisky in
India, which could be exploited by introducing W&M's strong portfolio of
internationally recognized brands in the country.
In the early 2000s, India was the largest whisky market in the world
with 75 million cases having been sold in 2006.7 Whisky accounted for 65% of hard liquor sales in India. Though Scotch sales comprised only 1% of
the total whisky sales as of mid 2007,8 they were reportedly picking up.
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1] UB Group owned business interests in Alcoholic
Beverages, Pharmaceuticals, Aviation, Fertilizers, International
Trading, Infrastructure and Media segments. The Beverage Alcohol segment
of UB group consisted of United Spirits, Shaw Wallace and Co. Limited
and United Breweries Limited.
2] Niren Shah, "A Strong Blend," Business Standard, May
28, 2007
3] Viveat Susan Pinto, "Mallya's Spirits Run High,"
Financial Express, May 2007
4] Arvind Kala, "Mallya's Giant Leap," Business
Standard, May 24, 2007
5] Niren Shah, "A Strong Blend," Business Standard, May
28, 2007
6] Niren Shah, "A Strong Blend," Business Standard, May
28, 2007
7] Niren Shah, "A Strong Blend," Business Standard, May
28, 2007
8] Arvind Kala, "Mallya's Giant Leap," Business
Standard, May 24, 2007 |
