UB group eyes UK scotch firm

The UB group has set its eye on a leading UK-based scotch whiskey company for acquisition. This is significant as the group is in the midst of restructuring the spirit business after snapping up Shaw Wallace.

The UB group, the second largest spirit company in the world, has completed first round of discussions with the UK distillery firm and the deal is likely to be finalised soon, said sources close to the development.

The sources added that the UB group executives were positive about the synergy that can be achieved by acquiring the UK firm's manufacturing base and the product portfolio. However, they refused to disclose the identity of the company.

When asked about the development, the UB group Chairman Vijay Mallya said the company was always on the lookout for acquisitions in the UK.

"Nothing has been finalised as yet and I cannot talk much on the acquisition plans now," he added. He, however, hinted that the proposed acquisition would be a "substantial" one.

The UB group, meanwhile, is planning to float a foreign currency convertible bond (FCCB) issue to the tune of $150-250 million.

Confirming the proposal to raise FCCBs, Mallya said, "The documents for the launch of the foreign bonds are being worked out, and we will inform the concerned regulatory authorities and agencies in due course."

Analysts pointed out that the proceeds of the proposed FCCB could be used for the acquisition. The UB group that owns McDowells & Co had last year closed a Rs 1,300 crore deal to buy 54.54 per cent stake in Shaw Wallace from the Chhabria-promoted Jumbo World Holdings.

After this buyout, the group became the second largest spirits producer in the world, ranked only after Diageo.

In the scotch whiskey segment, the group's flagship brand in India is Black Dog. The group is also planning to launch its low-cost variant, scotch whiskey to expand its market to a larger consumer segment, targeting the middle income group in particular.

For Black Dog Scotch, the company has been importing bulk from the Glassgow-based Scotch whiskey major, White & Mackay.

Following the acquisition, Mally had announced plans for bringing the group's widespread liquor business under one single entity 'United Spirits' and list the same by March 2006.

In addition, the group had also announced a series of expansion plans, which included investments up to Rs 100 crore for greenfield brewery plants in Orissa, Rajasthan and Uttar Pradesh, as well as expanding the ones existing in other states.

Mallya had also said that the group would foray into India's wine market, which has grown by 30 per cent in the past five years.