United Spirits shares fall on Diageo’s plan to sell Whyte & Mackay

Analysts viewed the move as a positive for the company, saying a sale Whyte & Mackay, which was purchased by the company in 2007, would help reduce the debt on USL’s books, currently at more than Rs7,000 crore. Photo: Mint

Mumbai: Shares of United Spirits Ltd (USL) lost 1.64% to Rs.2,578 per share on Tuesday on BSE at 10.20am, a day after Diageo Plc. has offered to sell a majority of the Whyte & Mackay whisky business. This came after the UK’s competition authority, the Office of Fair Trading (OFT), raised concerns about the impact of its acquisition of USL on whisky prices in that country.

In early morning trading, the shares fell to a low of Rs.2,400 a piece before recovering.

“The board of United Spirits Ltd will consider the OFT announcement and determine further course of action in this regard,” United Spirits informed the BSE on Tuesday.

Analysts viewed the move as a positive for the company, saying a sale of Glasgow-based Whyte & Mackay, which was purchased by the company in 2007, would help reduce the debt on USL’s books, currently at more than Rs.7,000 crore.

The regulator had said that Diageo had offered to sell most of the Whyte & Mackay business, except the Dalmore and Tamnavulin distilleries.

OFT added that its “duty to refer the merger to the Competition Commission is suspended”, till it finishes considering Diageo’s offer.

“Diageo will be assisting the OFT with its on-going work. A further announcement will be made in due course and we are not in a position to comment further at this stage,” a Diageo spokesperson said by email.

OFT said the merger this year between Diageo and USL may lead to whisky price increases in the UK because Diageo, the world’s biggest distiller, and Whyte & Mackay controlled a significant part of the market.

Diageo’s whisky brands like Bell’s and Johnnie Walker compete with Whyte & Mackay’s namesake label and other brands.

USL bought Whyte & Mackay in 2007 for £595 million, mostly funded by borrowings, as the Vijay Mallya-promoted company signalled its ambition to become a global player. However, the deal significantly increased USL’s debt and in part drove down the company’s margins because of interest costs. Whyte & Mackay generates less than 25% of USL’s sales.

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source.mint