Comment - UB Group and Whyte & Mackay: All or Nothing?
49% of Whyte & Mackay might not appeal, but 100% certainly would
The rumour-mill in India is in overdrive again, and United Spirits' ownership of Whyte & Mackay is under the spotlight again. Reports out of the country this week have claimed that United Spirits, part of the Vijay Mallya-headed UB Group, is set to offload a stake in the Scotch whisky company. While this in itself is not actually new news, the current quandary facing the UB Group suggests that something could happen sooner rather than later.
The UB Group is in trouble: its Kingfisher Airlines division is racking up debt by the day, and the headlines forecast doom and gloom for the conglomerate. One option being considered by UB is the sale of 49% of Whyte & Mackay, which it bought for US$1.2bn five years ago. This possible transaction has got the wires buzzing.
Hold on a moment: Mallya has long entertained the idea of divesting part of Whyte & Mackay – presumably to help pay down debt the company incurred when buying the Scottish firm in the first place. Indeed, a spokesperson for Whyte & Mackay told just-drinks today (12 April) that United Spirits mooted the idea over three years ago.
However, that this position has been reiterated at a time when Kingfisher is not as healthy as it used to be, then a stake sale of Whyte & Mackay - where it's "business as usual", the spokesperson noted - appears to take on a certain sense of urgency.
This brings us on to an even more important question: Who's going to buy 49% of Whyte & Mackay? What possible appeal would there be to anyone out there to spend up to $600m (by 2007's standards) to have little say and even less control over the company? Maybe such a person would be keen to gain a foothold in India? But, there are far better ways of achieving that than acquiring a stake in W&M, surely?
There is no doubting that the arrival of United Spirits, UB Group and Vijay Mallya in Glasgow has been a good thing for Whyte & Mackay: Prior to the purchase, the company was running at a loss, and now it's in profit. While those profits have dipped recently, as the unit moves away from bulk deals and focusses more on brand-building, there was bound to be a short-term hit.
But, if Mallya needs to realise a return from Whyte & Mackay, and soon, then I can see his only option being to put the whole thing up for sale.
And then he'd get some 'phone calls.
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