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Diageo deal under UK lens

July 22: Britain’s competition regulator today said it would investigate whether Diageo’s purchase of a stake in United Spirits would have a detrimental impact on the spirits market.

The main area of concern is likely to be centred on United Spirits’ Whyte & Mackay whisky brand, because Diageo is the world’s biggest Scotch company.

The Johnnie Walker and Guinness owner acquired a 25 per cent stake in the Vijay Mallya controlled entity earlier this month.

The British company had wanted to take control of more than half of the group’s equity when it announced a deal in November 2012.

The Office of Fair Trading in the UK said any representations should be made by August 2.

“The Office of Fair Trading is considering whether this agreement has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services,” said the OFT, which is in charge of protecting consumer interests in the UK.

If its review raises questions over a possible negative impact of the deal on the spirits market, the case would be referred to the Competition Commission of India to look into possible remedies.

On February 26, the Competition Commission of India approved Diageo’s plan to acquire up to 53.4 per cent of United Spirits within a period of five years.

“The proposed combination is not likely to have an appreciable adverse effect on competition in India,” the notice said.

In May 2007, Mallya had bought Scottish liquor maker Whyte & Mackay for 595 million ($1.18 billion), filling an important missing link in United Spirits’ product portfolio — Scotch whisky.

The Glasgow-based liquor maker’s brands include the Dalmore single high land malt, Jura single malt and Vladivar vodka.

Last year, the UB group claimed in its annual report that Dalmore had been rated as the fastest growing malt whisky during 2011, while Jura had come in second in the list of fastest growing malt whiskies. Both grew at around 40 per cent.

 
 
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