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UB in last lap of African safari

Calcutta, July 3: United Breweries (UB) is looking to divest its 75 per cent stake in United National Breweries in South Africa as part of its continuing efforts to sell non-core investments.

Besides United National Breweries, the company is also trying to sell off some its other investments. Group chairman Vijay Mallya told shareholders recently that “disposal of certain investments will result in substantial cash flow”.

United National Breweries is a leading producer of sorghum (traditional) beers in South Africa. It acquired South African Breweries’ sorghum beer business in 1999, and, at present, controls 95 per cent of the sorghum beer market in South Africa.

A. K. Ravi Nedungadi, chief financial officer of the UB group, said: “We are looking to divest our control in the company, and would not mind selling our entire 75 per cent stake in it if we get a reasonable price.”

A number of local players are eyeing the Bangalore-based group’s stake in the company. The UB group had earlier said it would divest 25 per cent of the company’s stake and retain the balance 50 per cent.

The UB group acquired a minority stake in the company, formerly known as National Breweries, in 1995. The UB group held 34.4 per cent in the company till January last year, when it increased its holding to 75 per cent through a buyback of shares from some 10,000 minority shareholders.

Marriott Merchant Bank — an investment bank with which the UB group has a favourable working arrangement — holds the balance 25 per cent.

At the time of UB’s entry into South Africa, National Breweries — one of the first big black-run businesses — was deep in debts and facing closure. The UB group managed to turn the company around, but observers say, since the sorghum market is on the decline, it wants to get out of the business.

Besides its stake in United National Breweries, the UB group was looking to sell off its investments in quite a few other companies like Mangalore Chemicals and Fertilisers, Aventis Pharma and Aventis Cropscience, Nedungadi said. “We have identified them as non-core and have decided against investing in these companies. We will sell our stakes in these companies if offered the right price,” he added.

The UB group has a 10.2 per cent stake in Aventis Pharma. At current market price, its stake is valued at Rs 89 crore. It also has a 6.6 per cent stake in Aventis Cropscience, which is valued at Rs 17 crore at current market price of the stock. In Mangalore Chemicals, the UB group has a 31 per cent stake. It was in financial distress before the Vijay Mallya-led management turned the corner.

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