Mallya to announce W&M deal on Wednesday

Vijay Mallya is finally clinching the deal for buying Whyte & Mackay. An announcement to buy the Glasgow-based company is expected to be made in London on Wednesday, May 16.

Sources close to the developments said the UB Group, the world's third-largest spirits maker, will have to pay £700 million ($1.38 billion). That's £150 million more than the earlier offer made by the Indian company. The acquisition will be made by United Spirits, a subsidiary of the UB group.

The sources said Mallya plans to list Whyte & Mackay on the London Stock Exchange and divest 49 per cent to the public and institutions.

Mallya, whose portfolio of liquor brands include India's biggest selling beer brand Kingfisher, is adding international brands and a global sales network to compete with rivals such as Seagram Co and Bacardi.

Whyte & Mackay was acquired by Immerman, Tchenguiz and investors including West LB in 2001 for £208 million . Both Immerman and Tchenguiz took full control of the company in June 2005.

Founded in 1844, White & Mackay produces W&M scotch whisky, the Dalmore Single Highland Malt, Vladivar vodka and Jura single- malt scotch.

UB is financing the acquisition by leveraging W&M inventory. UB Group's banks, Citigroup and ICICI Bank, have raised a substantial part of the proposed all-cash deal as non-recourse basis, leveraging W&M's inventories which are valued at over £ 300 million (Rs 2,520 crore). The balance will be raised as recourse basis where United Spirits will stand guarantee.

LBOs (as leveraged buyouts are fondly described in the banking circle) have of late gained popularity as a tool to finance big acquisitions.

All the recent big deals, including Tata Steel's acquisition of the Anglo-Dutch steel maker Corus Group, were LBOs. However, none of them used the target company's inventory to raise funds.

W&M's brands include W&M blended Scotch whisky, Dalmore single-malt whisky, Dalmore single-malt whisky and Vladivar vodka and Isle of Jura single malt whisky.

The sources said the UB group would half of the acquisition cost for the Glasgow-based company's inventories and the remaining half for its manufacturing assets and brands.

The deal, once clinched, would push up the UB Group's share in the global market. It will be able to wrest half of the Indian market.

Whyte & Mackay's most recent accounts revealed that operating profits increased by 28 per cent in the 12 months to September 30, 2005, to £11.1million, and turnover was up 4 per cent to £149million.