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Mallya pays £595m for Whyte & Mackay

INDIAN drinks magnate Vijay Mallya has vowed to pursue further Scotch whisky companies, as he announced details of United Spirits' £595 million acquisition of Whyte & Mackay.

Mallya characterised the deal, jointly announced in Glasgow with Whyte & Mackay's chairman, Vivian Imerman, as the plugging of a "gaping hole" in his aggressively acquisitive spirits operation, part of the larger UB Group. Mallya suggested that the "historic and momentous" purchase would serve as a springboad for further ventures into the Scotch industry.

"We now have a wonderful opportunity in front of us and you can be assured that we will capitalise on this. I don't think you should be surprised if we look at other acquisitions in the near future," he said.

"We are finally in Scotland, where we always wanted to be. We are investing here for the long term."

Mallya's United Spirits, India's biggest alcoholic drinks company and the world's third-biggest by sales volume after Diageo and Pernod Ricard, will acquire all the shares held by Imerman and other investors, the Bangalore-based businessman said.

The acquisition, which Mallya said had taken a year to negotiate following an "unsolicited approach" by him to Imerman, allows the new owners to promote the company's Whyte & Mackay Scotch and Jura single malt brands in India and China, the focus of operations for the company, and world's two fastest-growing major markets for Scotch. Mallya said W&M's spread of brands across the spectrum from "value" to "super premium" made it the ideal vehicle with which to penetrate the well-segmented Indian market.

The Scotch Whisky Association, the Edinburgh-based trade association that promotes the interests of the Scottish industry worldwide, welcomed the acquisition, saying it "shows that Scotch whisky has a global appeal and that international confidence in the industry's future prospects is strong".

It added: "We look forward to working closely with Whyte & Mackay's new owners on matters of mutual interest to protect and promote Scotch whisky in India and other international markets to the benefit of all Scotch whisky distillers."

The sale will generate a substantial windfall for the South African entrepreneur Imerman and his financier brother-in-law Robert Tchenguiz, who led the group of investors who paid 200m for the historic Glasgow whisky producer in 2001.

Imerman said: "I have done as much as I can do with the company and I have maximised income. The company either needed to be bought or buy a brand to be able to sell in emerging markets."

Whyte & Mackay's inventory of 155 million litres of spirits has been valued at between 350m and 400m, Mallya said, and gives him a "captive supply" of whisky for blending with Indian whiskies.

Mallya said that W&M's brands, which include the Dalmore Single Highland Malt and Vladivar vodka, besides the popular blended Scotch that goes by the company's name, are valued at between 170m and 190m. The deal price also includes 175m of Whyte & Mackay's debt. Imerman is to act as an adviser to W&M. Bob Brannan is to remain in the chief executive role.

"We have paid a very sensible price for the remaining assets," Mallya said of the deal, which was part-funded by India's ICICI Bank and Citigroup. The Indian distiller is to borrow 325m against W&M's assets to help finance the purchase.

Mallya insisted that he has no plans to cut jobs or sell any of its brands, some of which may be relaunched. He also confirmed his intention to float the company in London to fund further expansion. "Listing our business on an overseas exchange is important to give us currency to make further acquisitions," he said. "It makes sense to list United Spirits as a whole."

TIMELINE

February 2003 - Brian Megson, chief executive of Glasgow whisky producer Kyndal, who led its 200 million management buy-out just 15 months before, leaves the firm. Chairman Vivian Imerman denies that there was anything sinister in the decision, insisting it was mutual.

July 2004 - Alex Nicol appointed marketing director, following departures of finance director Scott McCroskie, UK sales director Alan Lowndes and bulk sales director Nick Swan

January 2005 - Imerman finally takes complete control, after buying German bank WestLB's 30 per cent stake.

February 2005 - Former Rangers chief executive Bob Brannan appointed

October 2006 - Company dismisses Indian newspaper report that India's United Breweries, owned by Vijay Mallya, was looking at a 400m takeover but admitted receiving offers for part of the business

12 May 2007 - Mallya suggests he is nearing a deal to take over the company. Speaking in Shanghai, Mallya told reporters that UB "will make a decision on a possible acquisition of W&M in two weeks".

How determined South African helped create a world leader

EVER since 51-year-old South African Vivian Imerman first got involved in Whyte & Mackay, many in the industry have believed that he has only ever been interested in turning a fast buck from a company which was in need of some urgent attention.

He was once asked in an interview how he conducts business. "I'm not in business to be popular," he said. "I'm in business to be effective. You can't bank popularity, you can only bank cashflow."

But yesterday's 595 million deal to sell the Glasgow business - and its brands such as Whyte & Mackay, Dalmore and Isle of Jura - to the flamboyant Indian brewer Vijay Mallya, marked the end of a solid recovery process at the firm.

Like him or not, London-based Imerman has managed to do exactly what he always insisted he would do - get it back on its feet and headed towards becoming a global brand.

Named 151st in the recent Sunday Times Rich List with a fortune of 500m, Imerman initially came into W&M as non-executive chairman before increasing his stake in the business and ousting the chief executive Brian Megson in April 2003 - just 15 months after he had led a 2001 management buyout of the business then called Kyndal. It was a brutal assault, some said. Other directors from that era were removed as unceremoniously.

He first gained his global reputation as a tough businessman when he became "The man from Del Monte" in 1992 through a reverse takeover deal. He engineered the transaction by placing shares in his own business, Royal Beech-Nut, and joined forces with Anglo American.

The combined financial firepower at his disposal proved too much for Del Monte which, at the time, had a turnover four times greater than Royal. Imerman grew Del Monte into an international business with a turnover of some 350m by 1998.

He took full control of W&M in February 2005, ending months of talks and negotiations that had drawn to a close in the sixth-floor offices of McGrigors' Glasgow headquarters. As chairman, Imerman had held a 35 per cent stake in the firm.

For Imerman it created a launchpad for a whisky company that had never quite fulfilled its potential.

Imerman and Robert Tchenguiz, his wealthy retail investor brother-in-law, had grand plans for the brands, drafting in marketing experts led by Tom Jago, the veteran guru who invented Baileys and Malibu.

In the year ended September 2002, W&M generated an operating profit of 20.6m from sales of 157.2m, representing 9.3 million cases of spirits.

The most recent figures show the business now has a 160m turnover, and profits are forecast to double to 50m. It is considered the world's biggest supplier of own-label and private-label Scotch.

Crucial were Imerman's moves to change the business culture within the company from a UK-focused operation to one capable of competing at an international level, growing the consumer appeal of Whyte & Mackay itself and of Isle of Jura and Dalmore.

Former Rangers FC chief executive Bob Brannan was appointed to the newly-created position of group managing director in 2005. Brannan had been interim managing director of William Grant.

Brannan has completed a complete rebranding of the products, and in the 12 months to Christmas last year, Whyte & Mackay increased sales 26 per cent, and in England alone 126 per cent. Jura saw sales rise 31 per cent.

NICK BEVENS

 
 
 

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