Olly Wehring

Comment - Wehring's Way: Diageo and UB Group - Whither Whyte & Mackay?

By | 24 September 2012

Could Whyte & Mackay be a sticking point between Diageo and The UB Group?

Could Whyte & Mackay be a sticking point between Diageo and The UB Group?

As the speculation linking a tie-up between Diageo and the UB Group in India intensifies, it's clearly only a matter of time before a deal is sealed. The main sticking points at this stage of talks between the two will be - obviously – value, and - inevitably – what to do with Whyte & Mackay.

While most of the headlines will be made by the former, I'm more interested in what happens with the latter. You can be sure that Diageo won't be able to have any part to play in the future of the Glasgow-based company, which came under UB Group's tutelage in 2007. W&M's namesake blended Scotch brand will attract the attention of anti-trust authorities in several markets and, much as Diageo may be up for getting involved in the single malts of Dalmore and Jura, it would make more sense to keep W&M in one piece - something I've posited before - and get a junior partner in on the action.

When Campari lined up majority control of Lascelles deMercado & Co earlier this month, I praised the Italian firm for coming to the rescue of a brand that had been neglected in recent times. More pertinently, the deal also showed the rude health of the spirits companies in the division below Diageo, Pernod Ricard and - in volume terms, at least - United Spirits.

I'm not saying that Whyte & Mackay has been neglected, because it clearly hasn't. Indeed, the unit was making a loss prior to UB Group's takeover and is now in far ruder health.

But, times have changed since 2007 and that suggests a divestment of W&M could play into the hands of the likes of Campari, Bacardi and maybe, William Grant & Sons (although the latter's Grant's blended Scotch brand may rule them out of any race).

For a start, the 'big boys' are all running at the kind of capacity in blended Scotch to rule themselves out of making a move. Pernod would also struggle to get over anti-trust hurdles thanks to the likes of Ballantine's and Chivas. Diageo and UB... well, I shan't repeat myself.

Enter, then, the 'smaller' players.

Whereas GBP595m - or US$1.18bn as the exchange rate stood in 2007 - may have been beyond their financial reach then, you can be sure, in these recessionary times, W&M will have to be sold at quite a loss.

Sources close to the situation tell me that W&M today is worth in the region of GBP390m ($631.2m).

And, if the likes of Campari can stretch to $414.8m for Lascelles deMercado, only three years after splurging $575m on Wild Turkey, then short-term pain for a firm of similar size could well generate long-term gain further down the road.

Expert analysis

Global market review of malt whisky – forecasts to 2015

Total malt Scotch sales fell by 4.8% in 2009 to 6.1m nine-litre cases, as the global recession took hold. This drop reversed the prior five-year performance of 2% CAGR growth. Nevertheless, the long-term outlook is very positive. This latest report from just-drinks/IWSR provides a complete market analysis of the global malt whisky sector, offering an expert review off the markets, brands, categories and companies.

Sectors: Mergers & acquisitions, Spirits

Companies: Diageo, UB Group, Campari, Whyte & Mackay, Pernod, Ricard, United Spirits, Bacardi, William Grant, Ballantine’s

View next/previous articles

Currently reading -

Comment - Wehring's Way: Diageo and UB Group - Whither Whyte & Mackay?

There are currently no comments on this article

Be the first to comment on this article

Related articles

just For Subscribers - The week in drinks

Here are the ten most viewed, subscriber-only items on just-drinks this week:

just the Round-Up - The week in drinks

The top ten stories published on just-drinks last week:

CHINA: Pernod Ricard's sales hit by state crackdown

Pernod Ricard has said its performance has been hit this year in China by the clampdown on inter-governmental gift-giving and banquets.

Read more on this hot issue

Round-Up - The Sale of Whyte & Mackay

In late-November, Diageo offered to sell the bulk of Whyte & Mackay to head off a competition inquiry in the UK. Here's a round-up of just-drinks' coverage of the news.

just-drinks tagline

Not a member? Join here

Decrease font sizeDecrease font sizeDecrease font size Increase font sizeIncrease font sizeIncrease font size Comment on this article Email this to a friend Print this page