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UK: Family seeks buyer for Glenmorangie

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Scotch whisky group Glenmorangie is in negotiations with other drinks firms with a view to selling the company, just-drinks.com has learnt. The decision appears to have been prompted by the wish of the firm's majority shareholder, the Macdonald family, to dispose of their stake.

Fifteen shareholders from the Macdonald family own over 50% of the company and so, by wishing to dispose of their stake, they are effectively putting the whole company up for sale.

The firm is understood to have instructed NM Rothschilds to issue a document to all potentially interested parties. This not only gives a desired purchase price but asks potential bidders for details over how they would intend to build the existing Glenmorangie brands and guarantee the future of the firm's estate [three distilleries and a bottling plant] and workforce.

The company has a market capitalisation of £191m and net debt of £34m. Taking into account the value of the brands and stocks, one industry source estimated the group could fetch up to £300m.

"This is going on as we speak," an industry source told just-drinks.com, while a separate source agreed that, "the company is actively involved in going out to find a buyer."

While it is not known who, if anyone, has entered into negotiations with the Broxburn-based whisky firm, three firms: Diageo, Pernod-Ricard and William Grant would all be likely to fall foul of competition authorities given their strong positions in the malt whisky category.

Allied-Domecq cannot be ruled out, but it may not be able to guarantee that the Glenmorangie estate would remain intact. Edrington too has been disposing of distilleries rather than purchasing more.

That leaves the field open to potential bids from Bacardi (which distributes Glenmorangie in Europe), Burn Stewart, and Brown-Forman. The acquisition of Glenmorangie would make good strategic sense for all of these. Many observers see the last firm as the front-runner.

B-F already has a 10% stake in Glenmorangie's equity, a seat on the board, 25% of the 'A' shares and it distributes the Glenmorangie brands in most global markets (except Europe). While most analysts see B-F as the front runner, some point to the way in which it was muscled out of its bid for the Dewar's brand by Bacardi and others point to a relative lack of success for Glenmorangie in the markets where B-F is distributor.

One possible outsider is LVMH, which has expressed interest in rebuilding its luxury brand portfolio and, importantly, is cash-rich.

The decision by the Macdonald family to sell has surprised many observers. Under Paul Neep, Glenmorangie has been a consistent performer for the past few years. Its turnover increased to £69m in 2004, while pre-tax profits rose by 10% on 2003 to £9.57m. The share price has also remained high. "It would be a very sound buy," said one source. "Glenmorangie has strong international brands and is on a sound financial footing."

But another source pointed to this as the very reason why the family appears to be wanting to take the money and leave. "The firm has successfully built up the value of the brand and the feeling is that the share price has now peaked." Glenmorangie's strategy of deep discounting has left it with plenty of cash but many feel its reliance on this tactic means that long-term success is by no means assured.

When approached, Glenmorangie flatly denied that anything was going on. "As far as we know there is nothing in this," the firm said. "We hear this from time to time, but in any case we would never comment on industry speculation."


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