Mallya to buy out Chhabrias in SWC for $300 m

Bangalore, March 21 | Updated: Mar 22 2005, 05:30am hrs
Chhabria family-owned Jumbo World Holdings Ltd (JWHL) has agreed to sell 54.54% of Shaw Wallace and Co (SWC) shares to Vijay Mallyas McDowell & Co Ltd and a few of SWCs affiliates for $ 300 million or Rs 1,300 crore. The agreed purchase price imputes a value of Rs 325 per SWC share, which includes a fee for worldwide non-compete undertakings.

For UB-group chairman Vijay Mallya, it was a battle won and family prestige regained. In 80s, when his father Vittal Mallya tried to buy a stake in Shaw Wallace, the deal went to Manu Chabbria.

With this transaction, the UB group will have a significant share of the Indian spirits business with annual sales of around 60 million cases which should place it in the second rank amongst global spirit companies.

A UB group statement said both the companies have reached a binding agreement for McDowell and its associates to acquire indirect control of upto 54.54% of the shares of SWC from JWHL.

Consequently, McDowell and parties in concert propose to revise the open offer for shares of SWC to reflect a change of control pursuant to the proposed acquisition. It is also proposed to increase the offer price from Rs 250 a share to Rs 260 a share. This adjusts for the non-compete fee as permitted by the current Sebi regulations.

The UB group chairman, Vijay Mallya stated that this transaction is a culmination of a long journey which would benefit the shareholders of McDowell and SWC and the consumers at large.

Economic of scale will result in significant cost advantage and the consuming public will benefit from greater variety of choices, he said.

SWC is primarily engaged in spirits business comprising both IMFL and country liquor. Additionally it has holdings in other businesses.

Its majority control of Narmada Gelatines Ltd will be divested to a Jumbo affiliate as soon as practicable so as to maintain Jumbos management team.

On February 22, UB group had bid for a 25% equity stake in Shaw Wallace and Co for Rs 250 a share. But Shaw Wallace had described this bid as a hostile one.