DNA
New Delhi / Mumbai, Mar 15: It looks, this time around, liquor baron Vijay Mallya may actually clinch the deal to take over Glasgow-based Scotch whisky producer Whyte & Mackay.
If you go by the presentation made by Mallya's United Spirit Ltd at an investment summit in Mumbai, it is economic compulsion that is driving him to acquire the Scottish whisky maker.
The need of the hour at United Spirits is to go for strong volumes and improved the product mix to expand its current margin. And this entails increased focus on the top-end whisky segment.
The spirit company's management believes that Scotch whisky is likely to emerge as a very important segment, and so, it is gearing up to boost its presence there.
And it is this need of the company - to enhance Scotch whisky offering in the market - that makes Whyte & Mackay a prized win for Mallya.
In the presentation, United Spirits says that Whyte& Mackay would provide the much-needed bulk Scotch for the Indianoperations.
The company currently imports 12 million litres of Scotch for its blending requirements, which is only likely to increase in future. But even with imports, the company could not meet the demand. This was taking prices of Scotch whisky northwards.
United Spirit said that it was close to acquiring Whyte & Mackay, for which a due diligence wascurrently on. United Spirits management believes that acquiring Whyte &
Mackay would be EPS accretive from year one.
Of the total cost of acquisition (quoted to be around £550 million), 70% is composed of the value of the Scotch inventory of the Scottish whisky firm and the acquisition would be funded through debt.
Of this, only 50% will be on United Spirits' books, while the remaining will be non-recourse debt on White & Mackay's books.
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