Mumbai, May 16: The acquisition of Glasgow-based Scotch maker Whyte & Mackay will turn Vijay Mallya’s United Spirits into the second largest spirits maker in the world with a production capacity of 75 million cases a year.
Mallya will be stumping up £595 million (Rs 4,803 crore) to buy out Vivian Immerman, chairman of Whyte & Mackay, and his associates. Immerman will stay on as adviser to Mallya though there is no word yet on whether the other top managers will do so as well. The sale generates a windfall for Immerman and brother-in-law Robert Tchenguiz who paid £200 million when they acquired the Glasgow-based liquor maker in 2001.
“We have paid a very sensible price,” Mallya said, shrugging off suggestions that he may have overpaid for the W&M assets and a debt burden of £175 million.
Mallya said the value of Whyte & Mackay’s inventory of bulk Scotch whisky of 115 million litres was between £350 million and £400 million and its main line brands were valued between £170 million and £190 million.
“The combined profits of United Spirits and Whyte & Mackay are expected to be earnings accretive from the first completed year of operations after accounting for the cost of funds applied to the acquisition,” Mallya added.
Shares of United Spirits, maker of the McDowell brand of Indian whisky, snapped a three-day losing streak, climbing as much as 8.2 per cent. The shares rose 6.9 per cent to Rs 895.20 at the end of trading on the BSE, the biggest gain since March 6.
More than its gain in global rankings, Whyte & Mackay will fill an important missing link in United Spirits’ product portfolio — Scotch whisky. Demand for Scotch whisky both globally and more particularly from emerging market economies like India have been recording a strong growth in recent times with increased consumer spends.
A Citigroup report states that demand for Scotch whisky has been growing at around 35 per cent in India against an overall liquor market growth of 12 per cent. United Spirits also plans to cater to China and West Asia.
“Until today, the only missing link in our portfolio has been Scotch. We needed a reliable supply source considering that we use Scotch in our Indian blends. The potential for premium Scotch in India is enormous,” Mallya said.
W&M’s Invergordon distillery, near Inverness, can produce 40 million litres a year. Mallya said the capacity of this distillery can be doubled at an affordable cost of £10 million.
The scotch maker has its origins in the Glasgow firm of Allan & Poynter, founded in November 1843 by John Poynter, a successful chemical manufacturer, and William Allan, a ham curer. The firm was meant to warehouse dry goods for the grocery trade. In time, the business changed hands and the new owner, William Scott recruited two young men to help him in the business, James Whyte and Charles Mackay. The rest is history.