United Spirits (USL) on Friday said it has approved the sale of its UK subsidiary Whyte & Mackay (W&M) to the Philppines-based Emperador for 430 million pounds (about $727 million). The sale process, which saw several suitors including a former chairman of the scotch-maker, in January started addressing competition concerns arising from Diageo's acquisition of a 28.78% stake in USL. The sale includes all the five distilleries owned by W&M and the enterprise value of 430 million pounds ($727 million) includes the company's current debt and its pension benefits.
USL chairman Vijay Mallya had bought W&M for 595 million pounds ($1.2 billion) in 2007, a move which gave USL an access to large scotch reserves for its blended whiskies. Analysts expect the sale to help lower USL debt. USL net debt stood at Rs 7,579 crore in the December quarter, nearly half of which was in the books of its UK holding company.
USL said its board on Friday recommended its subsidiary to consider the sale of the entire issued share capital of W&M to Emperador. “United Spirits UK has approved the sale and entered into the share sale and purchase agreement with Emperador UK and Emperador,” the company said in a communication to stock exchanges. The deal includes an agreement that W&M would supply scotch to USL for three years.
Emperador, owned by the Alliance Global Group, is a large conglomerate in the Philippines with interests across real estate and restaurants. The firm sells one of the world's largest selling brandy labels under the same name.
“The sale is subject to necessary Indian and UK regulatory approvals and shareholder approvals, including an approval by the Reserve Bank of India since the sale will result in a significant write down of loan amounts recoverable by the company from its overseas subsidiary,” the company said.
The deal's enterprise value or Ebitda multiple of 19.3x is based on W&M's normalised Ebitda estimate for FY14, the company said. “This calls into question the earlier value Mallya paid for the business. Over the past few years, the industry has matured and grown, so the valuation is lower,” said an analyst. “Shareholders, however, have nothing to complain about, with the debt burden coming down in addition to the second open offer by Diageo,” he said.
Said an elated Mallya, “I am proud of what W&M had achieved under USL