Whyte & Mackay tipped to attract bid interest

CHINESE, Indian and Russian investors are tipped to be among bidders for Glasgow-based whisky distiller Whyte & Mackay after Diageo put the brand up for sale.

Whyte &  Mackay's headquarters in  St Vincent Street. Picture Robert Perry
Whyte & Mackay's headquarters in St Vincent Street. Picture Robert Perry

The Office of Fair Trading (OFT) today said that Diageo has offered to sell the “bulk” of the Whyte & Mackay business – including its grain distillery at Invergordon and its Fettercairn and Jura malt units – in order to satisfy competition concerns.

Diageo – Scotland’s largest distiller and the owner of brands including Bell’s, J&B and Johnnie Walker – gained control of Whyte & Mackay in July after acquiring Indian drinks conglomerate United Spirits.

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The OFT said that retailers had expressed concern that Diageo’s control over both Bell’s and Whyte & Mackay would limit competition in the blended whisky market in the UK, prompting the FTSE 100 group’s offer to sell the distilleries and brands.

Under the proposed deal – which will now be considered by the OFT – Diageo would retain the Dalmore and Tamnavulin malt distilleries.

Alan Gray, a whisky analyst at Sutherland’s, told The Scotsman: “I don’t think there will be any shortage of buyers. The whisky industry is going through a good patch so I think there will be venture capital interest.

“I would expect Chinese, Indian and Russian investors to be interested in Whyte & Mackay and other drinks companies such as Brown Forman in the United States and Bacardi.”

New York-listed Brown Forman owns Jack Daniel’s Tennessee whiskey, Southern Comfort liqueur and Finlandia vodka, while rum maker Bacardi already owns a handful of malt whisky distilleries in Scotland, having bought John Dewar & Sons in 1997.

Gray added: “If the distilleries were to be sold on their own then there would be a lot of private investors interested in the malt distilleries because they don’t often come up for sale.

“Pernod Ricard would also be interested in the Invergordon grain distillery because, even though it’s Scotland’s second-largest whisky company, it only has one grain plant.”

Diageo is believed to have chosen to keep Dalmore and Tamnavulin because they sell well in overseas markets. Dalmore – which is understood to be popular in global duty free and the US – is also a premium single malt, an area in which Diageo’s current portfolio could be seen to be lacking.

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Chris Walters, OFT chief economist and the decision maker in this case, said: “These companies are two of the leading suppliers of blended bottled whisky in the UK, especially to supermarkets and other large retailers.

“Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers.

“We are now considering Diageo’s offer to sell the bulk of the Whyte & Mackay business with the exception of two malt distilleries, to address our concerns.”

Whyte & Mackay is also a big player in the own-label whisky market, producing Scotch for supermarkets and other customers, heightening competition concerns.