UB Group flagship company United Spirits today said its board has approved the merger of Balaji Distilleries (BDL) with itself in an all share deal.
The shareholders of Balaji would get two shares in the company for very 55 held in BDL, USL said in a filing to the Bombay Stock Exchange.
The merger would be effective from April 1, 2009, subject to regulatory approval.
"The merger would de-risk USL's significant earnings in an important market and would give United Breweries the strategic advantage to consolidate the group's leadership position in a large and growing state," UB Group Chairman Vijay Mallya said.
BDL, which has a distillery and brewery facility in Tamil Nadu, has been functioning as a contract manufacturing unit for UB for the past 25 years. BDL's distillery has a capacity to produce 10 million cases per year, while brewery has a capacity of nine million dozens per annum, it said.
The Mallya-owned company produces over 140 brands in different flavours. The Tamil Nadu market accounts for about 18 per cent of UB Group's brewing business.
"Tamil Nadu is the only state where USL does not own production facility.... The acquisition would give it the required leeway to meet the increasing demand for its brand in the state," the company added.
Besides, USL board has declared a dividend of Rs 1.50, at the rate of 15 per cent, on equity shares of face value of Rs 10.
Shares of USL closed down 3.14 per cent at Rs 819.50, while Balaji Distilleries was down 2.46 per cent at Rs 25.80.
