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Does Diageo really care that it may have to offload a large chunk of Whyte & Mackay? I have the sneaking suspicion that the firm probably doesn't.

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Bagging the Glasgow-based Scotch producer, when it took control of India's United Spirits earlier this year, was clearly a secondary concern for the Smirnoff group. After all, Diageo already has an embarassment of riches in its Scotch whisky cabinet. The group is focussed on the premium sector and its mantra now for consumers to "drink better".

Diageo's not quite giving everything up, however. The company's bid to retain W&M's Dalmore and Tamnavulin distilleries is, according to the firm, because the facilties supply United Spirits and its international markets.

But, the play for the Vijay Mallya-controlled group has always been about getting a solid foothold in India's vast and expanding local spirits market. 

So, the fact that Diageo appears to have rolled over relatively easily in offering to sell most of Whyte & Mackay is no surprise. Indeed, CEO Ivan Menezes offered a hint of this last week, when I asked him at a media Q&A about the UK's Office of Fair Trading probe into W&M's ownership. “Whatever the outcome (of the OFT investigation), the core asset of what we are buying with USL, we are still very bullish about,” he said.

And, with the UK accounting for just 7% of the world's Scotch consumption, Diageo has little need, or appetite to get embroiled in a lengthy competition inquiry in the UK (the OFT is the backstop for the more powerful Competition Commission). Does the issue matter enough to Diageo to bother with the legal fees that such an inquiry would generate?

Elsewhere, the speculation over potential buyers for W&M has kicked-off with gusto.

Bernstein analyst Trevor Stirling suggests the probable suitors fall into three categories: either a marketer of value brands seeking supply; a bigger player wanting to secure supply of grain whisky from Invergordon such as Beam Inc or Bacardi, or a wild card – such as Suntory, a Chinese baijiu major, or private equity. Brown-Forman and Pernod Ricard have also been touted.  

For good measure, allow me to throw one more name into the mix: Russian Standard. Owner & chairman Roustam Tariko certainly appears to have cash to hand, judging by the fact that he owns his own bank. And, his group already has a relationship with W&M, which distributes its vodka brand in the UK.

As my colleague Olly Wehring noted yesterday, W&M has had a troubled past in terms of ownership. A stable home is the least it deserves.


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