"Vasari Chairman Vivian Imerman has noted Diageo's reported interest in selling the Whyte & Mackay business due to an investigation by the Office for Fair Trading. If it is decided that Diageo will sell it, Imerman has expressed an interest in buying it back," said a statement from Vasari Global, a company started by Imerman in 2008 after he sold the Whyte & Mackay business. Vasari focuses on opportunities in emerging and frontier markets in consumer packaged goods, FMCG and SMCG.
Indian liquor baron Vijay Mallya had acquired the Glasgow-based company, selling the Dalmore, Jura and namesake scotch whisky brands, in 2007 from Imerman and his brother-in-law Robert Tchenguiz for $1.2 billion. The duo had taken full control of the Glasgow-based Whyte & Mackay during 2005. Imerman had been part of a group of investors who paid £208m for the company in 2001.
More From This Section
"Whyte & Mackay would make an important addition to the portfolio of spirits and beer businesses in Africa and Asia where Imerman has been concentrating his efforts through his company Vasari since his five-year restraint expired last year," the company's statement said.
Since the OFT's decision was announced on Monday, there has been immense speculation not only about potential buyers but also about the bargaining power of Diageo and United Spirits at a time when they are forced to sell the asset. Industry experts have estimated the company's assets may fetch only $700-$800 million.
"This is certainly not the best time for selling, but certainly there are a lot of companies around the world that want to buy a scotch brand, and Diageo-USL will certainly get some money for it," says Val Smith, Chairman of International Wines and Spirits Research.
Whyte & Mackay had fetched United Spirits revenue of about 218 pounds, or about 25 per cent of the company's total revenue, in 2013 financial year. It was supposed to help USL add scotch whisky to its portfolio of products as Whyte & Mackay came into USL with a strong place in the scotch whisky business, grain and more distillation, and a great heritage of brands. Whyte & Mackay also owns the Dalmore and Jura brands, as well as Vladivar vodka and Glayva liqueur.
United Spirits reported consolidated losses in three of the last five years, despite healthy standalone profits, and this could be attributed to high interest cost of servicing the debt raised for the $1.2 billion transaction undertaken for the acquisition. Analysts say the sale of Whyte & Mackay could provide an upside of 27 per cent to 40 per cent to the company's FY15 and FY16 estimates. The sale of Whyte & Mackay will also result in improved working capital (since Whyte & Mackay has ageing scotch inventory), return ratios, and would lower the leverage, analysts say.
Whyte & Mackay is also a non-core investment for Diageo, and it is unlikely to fit in Diageo's strategy of premiumisation, even in the scotch whisky segment. Diageo, the world's largest distiller that has now close to 26.4 per cent controlling stake in India's largest spirits company, had offered to part with three distilleries owned by Whyte & Mackay to allay competition concerns arising from the deal. OFT said it had found substantial competition in the retail sector between Bell's whisky (a Diageo label) and Whyte & Mackay's own label, and the combined capacity of Diageo and USL may lead to substantial reduction of competition in the supply of blended whisky to retailers, leading to a substantial increase in prices of blended whisky.