Mallya punch for Shaw Wallace

UB bids Rs 300 crore for 25% stake; 'hostile bid', says Chhabria firm.

Liquor baron Vijay Mallya said his UB Group had bid for a 25 per cent equity stake in the Manu Chhabria-family controlled Shaw Wallace & Co (SWC) for Rs 250 a share, nearly an 8 per cent premium over SWC's closing price of Rs 231.05 at the Bombay Stock Exchange today.

Mallya also declared that his group was not mounting a hostile bid for SWC.

He claimed that the Chhabria family had changed its plans of selling its spirits business (Shaw Wallace Distilleries) and was now inviting bids for its 55 per cent stake in the holding firm, SWC. "I'm bidding for the 55 per cent also," Mallya said.

But Shaw Wallace promptly described his bid as a hostile one. A Shaw Wallace spokesperson said: "According to our understanding, any bid that does not come with the consent of the promoters or of the incumbent management is a hostile bid. In this case, both these provisos have been met and we therefore deem it a hostile bid. We will deal with it appropriately."

An interested observer with ties with the Chhabria family interpreted Mallya's open offer as an attempt to stall the sale of Shaw Wallace Distilleries, for which Mallya has bid too.

"When there's an open offer, the company cannot take any major decision on selling anything. Also, who will bid for Shaw Wallace Distilleries if Mallya acquires 10-15 per cent of it through the open offer," the observer asked.

UB group companies McDowell & Co, Phipson Distillery and United Spirits are making the open offer for a total consideration of Rs 300 crore, Mallya said.

The Chhabria family holds 55 per cent of the Rs 48 crore paid-up capital of Shaw Wallace & Co. SWC holds 40 per cent of the equity of Shaw Wallace Distilleries, the spirits company, and 50 per cent in SAB Miller India, a joint beer venture between South African Breweries and Shaw Wallace.

If Mallya succeeds in gaining control of Shaw Wallace, his group will become the second-largest player globally after Diageo. In India, the UB group will straddle the market without competition.

"My dealing has been only with Vidya Chhabria, chairperson of the Jumbo group, and not with other members of the family. She is aware of my bid," Mallya told the media from New York in an audio conference, adding that the UB group did not hold any shares in SWC.

Mallya said he was confident of garnering a 25 per cent stake as the price bid was attractive. "The pricing is done in accordance with the historical average of SWC. The SWC stock recorded an average price of Rs 161 in 2005, Rs 94 in 2004 and Rs 71 in 2003," he explained. At that price, SWC's value comes to Rs 1,200 crore.

Mallya remained non-committal on whether the price would be revised, adding that "it would depend on the situation".

Mallya claimed that the UB group had emerged as the biggest bidder for Shaw Wallace Distilleries with a price bid of Rs 1,251 crore. The closest bid was the combined offer made by Ramesh Vangal, a Singapore-based Indian businessman, and New Bridge Capital.

"The Chhabria family's decision of selling 55 per cent in the mother company would have, in any case, initiated a public offer to minority shareholders as per Sebi guidelines. Considering that we are interested in Shaw Wallace, we are now moving a step closer to the larger picture and have now made a bid for the 25 per cent equity stake. This public bid process was necessitated; it was only a question of timing, "Mallya added

The $2 billion Jumbo group has a complex shareholding pattern. All the group companies, including SWC, have cross holdings.

This means that if Mallya manages to pick up a considerable stake through his offer, he will end up having equity in several other Jumbo group companies. The Jumbo group companies are Hindustan Dorr-Oliver, Mather & Platt, New Video and Gandhinagar Electronic.

The UB group's spirit brands include McDowell's, XXX rum and Scottish Crown whisky. Shaw Wallace's liquor brands include Royal Challenge and Director's Special whisky.

In December, Britain's biggest brewer, Scottish and Newcastle Plc, had a strategic alliance with the UB group for its beer business for Rs 940 crore.

The stakes

• If successful, UB will become the world's second largest liquor player after Diageo
• Mallya will get control over many companies in Chhabria's Jumbo group, by virtue of SWC's holdings in these companies