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Mallya's United Spirits expects $1bn valuation, post-merger
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Friday, 01 April, 2005, 08 : 00 AM [IST]
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Our Bureau, Mumbai
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The United Breweries group chairman Vijay Mallya is all set to merge his entire spirits interests, including the just acquired Shaw Wallace & Co (SWC), under the banner of United Spirits, and is looking at unlocking value within 18-24 months mostly through the induction of a foreign partner. "United Spirits as an entity will be in the horizon in the next four to six months," he said. Post-merger, the group expects its valuation to double to almost $1 billion. It is likely to offer a 26 % stake to a strategic or a financial partner in the new company.
The consolidation of Mallya's spirits interests will be a two-fold affair. Initially, three of UB's existing companies - McDowell & Co, the recently acquired Herbertsons and Triumph Distillers & Vintners - will be merged under the banner of United Spirits during the coming financial year, 2005-06. Subsequently, SWC, for which he signed a Rs 1,300-crore acquisition agreement with the Manu Chhabria family, will also be merged with United Spirits, placing it firmly as the world's second largest spirits marketer. The UB group is acquiring 54.54 per cent share in Shaw Wallace from Jumbo World Holdings at Rs 325 a share.
Following the merger, Mallya's direct and indirect stake in the new entity could be well over 50 per cent. He holds over 40 per cent stake in his existing spirits flagship company, McDowell & Co Ltd.
"By striking a joint venture with Scottish & Newcastle in the beer business, Mallya has already demonstrated his willingness to dilute stake and his willingness to share management through a very transparent structure," UB group Chief Executive Officer (CFO), Ravi Nedungadi said.
Outlining his international vision for the UB group he said, "I have not done the math (of UB's consolidated revenues). But our company will pay Rs 15,000 crore a year in excise and other revenues to the government. Very clearly, now I have SWC, McDowells, TDV (Triumph Distillers & Vintners) and Herbertsons. The liquor businesses of all these companies would get combined into United Spirits Ltd (USL). I have people already working on it. Also, I have to merge and consolidate the companies with a spirit of urgency because one of the key return on investment parameters is in the synergies that I am expecting in combining the two."
The plan is to merge all its spirits entities, including the newly-acquired Shaw Wallace and Herbertsons, within six months to create a liquor giant. And to bring under one roof the Rs 1,250-crore flagship company, McDowell & Co, the Rs 350-crore Herbertsons, which owns the largest selling whisky brand Bagpiper, Triumph Distilleries, makers of Gilbey's Green Label, which was taken over from Diageo for Rs 60 crore and Shaw Wallace, for which UB has so far paid Rs 678 crore.
United Breweries holdings is controlled by six investment companies belonging to Mallya. UB Holdings in turn, controls 40% of McDowell which, along with UB Holdings' subsidiaries, control all the other UB companies.
McDowell's flagship brand McDowell No1 whisky, with sales of 3.3m cases, is also the second-fastest growing spirit brand in the world, recording 24% volume growth in 1998.
McDowell has five other brands - McDowell No 1 Brandy, Kerala Malt Whisky, Old Cask Rum, Celebration Rum and Diplomat Whisky. McDowell holds over 40 brands scattered over a variety of segments. McDowell is rated as one of the few companies in the world which owns seven brands selling more than a million cases each. SWC offers brands like Royal Challenge whisky, Director's Special whisky, the second largest selling whisky after Bagpiper, and White Mischief vodka, all millionaire brands.
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