UB Group to rope in foreign equity partner

Spirits business set to see tie-up.

The dust is settling down on the UB Group's acquisition of Shaw Wallace, but Chairman Vijay Mallya is already readying for his next move.

Company sources said Mallya was planning to rope in an overseas equity partner in the UB Group's spirits business (to be called United Spirits, after McDowell, Herbertsons, Triumph Distilleries & Vintners and Shaw Wallace are merged), similar to what the group has done in the beer business. In the beer business, the UB Group had entered into a joint venture with British brewer Scottish & Newcastle.

UB Group sources added that a partner would be inducted in United Spirits only after the integration of the spirits business was completed in the next 18 months.

"After this, we will dilute some equity to a partner. It may be a strategic or a financial investor. We will look at raising funds through various options and one of the options is this," a group source explained. The mandate for identifying an overseas partner will, in all likelihood, be handed down fairly soon.

The UB Group is acquiring 54.54 per cent in Shaw Wallace from Jumbo World Holdings at Rs 325 a share. It had made an open offer to acquire 25 per cent of Shaw Wallace's equity at Rs 260 per share. The Rs 325 per share price includes a premium of Rs 65 for a five-year, worldwide, non-compete undertaking by the Chhabria family.

"We do not have any plans to increase the open offer price from Rs 260," sources close to the development said. The financial closure is expected by May.

Next on the agenda is the merger of all the spirits entities which will result in the world's second largest spirits company.

"The consolidation will help in getting a good valuation when roping in a partner," sources said. The UK-based Diageo is the global leader in liquor sales.

With Shaw Wallace set to be in the UB Group fold, the group will now enjoy a market share of over 60 per cent of the Rs 23,500 crore liquor retail market.

Next move

MASTER PLAN

UB plans to merge McDowell, Herbertsons, Triumph Distilleries and Shaw Wallace

An equity partner will be inducted after the integration of these arms

BEER CUE

The UB Group had entered into a joint venture with British brewer Scottish & Newcastle