The Hindu : National : Scottish & Newcastle in Rs. 940-crore deal with United Breweries

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Monday, Dec 20, 2004

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National

Scottish & Newcastle in Rs. 940-crore deal with United Breweries

By Our Staff Correspondent

Vijay Mallya, Chairman, UB Group with Tony Froggatt, Chief Executive, Scottish & Newcastle at a press conference in Mumbai on Sunday. — Photo: Shashi Ashiwal

MUMBAI, DEC. 19 . In a step to further consolidate its dominant position in the Indian beer market, United Breweries Ltd. (UBL) has entered into a transaction with Scottish & Newcastle (S&N).

S&N will receive 17.5 per cent of UBL's equity through a preferential allotment for a consideration of Rs. 217 crores at Rs. 575 a share.

Addressing presspersons here today, Vijay Mallya, Chairman, UB Group, said S&N would make a public offer to acquire up to 20 per cent of UBL's shares at Rs. 575 each. It would also invest a further Rs. 247 crores in UBL through a redeemable preference share (non-convertible) with a coupon rate of three per cent. The entire transaction is worth Rs. 940 crores.

Under the terms of a shareholders' agreement between UBL and S&N, which will hold equal shares in UBL not exceeding 37.5 per cent each, Mr. Mallya will continue as UBL Chairman and will have the right to nominate its Chief Executive Officer. Similarly, S&N will have the right to nominate the Chief Financial Officer.

Millennium AlcoBev Ltd. (MABL), a UB Group company in which S&N has invested Rs. 177 crores, will be combined with UBL. "We have had a honeymoon period in the joint venture to get comfortable and now there is a platform for a congenial partnership going forward. As a result of this, the UB Group's share in the Indian beer market will be above 50 per cent and the Kingfisher Beer brand will also receive a significant boost in the overseas markets through S&N's wide distribution network," said Mr. Mallya. S&N will continue its Rs.50-crore External Commercial Borrowing facility to the UBL. The Board will have nine directors — two executive directors (CEO and CFO), three non-executive directors and two nominees each from UB and S&N.

Mr. Mallya was not keen on immediately launching S&N's brands here.

"There is always the inevitable question about launching foreign brands whenever there is a tie-up. We have extremely strong brands here and will focus on increasing the market share, penetration and outperforming competition. There are many constraints in launching a new brand here," Mr. Mallya said, adding traditional brands continued to retain market leadership.

Mr. Mallya said the Vittal Mallya Research Foundation got two products ready: one is a natural, environment-friendly product to eliminate the larvae of dust-mites, the main cause of paediatric allergies; and another is a neem-based pesticide. Six U.S. patents, including for these two products, were filed.

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