Vijay Mallya's UB Group has acquired a controlling stake in Shaw Wallace & Company. The UB Group's spirits firm McDowell & Co and its affiliates today announced they had entered into an agreement with Jumbo World Holdings, promoters of Shaw Wallace, to acquire the latter's 54.54 per cent stake in the company for Rs 325 per share, which includes a fee for a worldwide non-compete agreement.
The deal paves the way for the UB Group to become the undisputed leader in the Indian liquor business. The UB Group will now have annual sales of 60 million cases. The deal catapults the group into the world's second largest spot after UK's Diageo group. The Chhabria family will be exiting the liquor business.
The UB Group's total investment in Shaw Wallace was estimated at $300 million (over Rs 1,300 crore), said a media statement issued jointly by the Jumbo World Holdings Chairperson Vidya M Chhabria and UB Group Chairman Vijay Mallya.
The UB Group has also raised its open offer price by Rs 10 to Rs 260 per share to abide by Securities and Exchange Board of India (Sebi) guidelines. In the media release, the UB group said this adjusted for the non-compete fee as permitted by Sebi’s regulations.
Late in February, the UB Group had announced a public offer to acquire 12 million equity shares, representing 25 per cent of the paid-up equity share capital of Shaw Wallace, at Rs 250 per share.
“This transaction is a culmination of a long journey which will benefit the shareholders of McDowell and Shaw Wallace and consumers at large. Economies of scale will result in significant cost advantage and the consuming public will benefit from a greater variety of choices," Mallya said.
According to the UB Group, a non-competing premium of Rs 65 a share has been paid for the Shaw Wallace stake, in addition to the Rs 260 open offer price, to arrive at the Rs 325 per share price.
The UB Group has also agreed to purchase certain other affiliates of the Jumbo Group which are, among other things, engaged in the distribution of spirits in India and abroad.
Shaw Wallace also holds a 50 per cent stake in beer joint venture SABMiller India and Narmada Gelatines. It is reliably learnt that the London-based SABMiller will consolidate its holdings in the Indian arm.
Narmada Gelatines will be divested to a Jumbo Group affiliate. SABMiller acquired a 50 per cent stake in Shaw Wallace Breweries for Rs 625 crore in 2003.
The McDowell scrip today closed at Rs 251.60 on the Bombay Stock Exchange, up 4.99 per cent over the previous close on Friday. The Shaw Wallace share closed at Rs 222.10, up 1.95 per cent.
The UB Group's open offer will begin on April 18 as scheduled and end on May 7.
The UB Group is planning to consolidate its spirits business under one arm, United Spirits. The business includes McDowell, Herbertsons and Triumph Distilleries & Vintners. However, the group indicated that Shaw Wallace may be consolidated with its spirits arm in the future.
Shaw Wallace is engaged in the spirits business, consisting of both Indian-made foreign liquor (IMFL) and country liquor, and owns well- known brands like Royal Challenge whisky, Director's Special whisky, Mughal Monarch,White Mischief vodka and Golconda brandy. Shaw Wallace owns 14 distilleries in the country.