BENGALURU : The British Office for Fair Trading said it is considering Diageo Plc’s offer to sell majority of United Spirit Ltd’s Whyte & Mackay business in order to deal with competition concerns regarding bottled blended Scotch whisky in the country.
Diageo acquired a 25.2% stake in Vijay Mallya-owned United Spirits in November last year and the UK regulator said the deal between the two companies is likely to create a monopoly for the British liquor maker in its home market.
Mallya had purchased Whyte & Mackay in 2007 for $1 bln. “The parties are major suppliers of bottled blended whisky to retailers, with Whyte & Mackay also being an important supplier of own-label blended whisky. A number of retailers expressed concerns to the OFT about possible price rises for bottled blended whisky sold in the UK as a result of the merger,” said the regulator.
Following its investigation, the Office for Fair Trading said the merger is likely to lead to a substantial lessening of competition in the supply of blended whisky to retailers.
“…we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers,” Chris Walters, chief economist, was quoted as saying in a statement issued by the Office for Fair Trade.
“We are now considering Diageo’s offer to sell the bulk of the Whyte & Mackay business with the exception of two malt distilleries, to address our concerns,” he added.
According to the regulator, Diageo can divest the whole of Whyte & Mackay business except the Dalmore and Tamnavulin malt distilleries along with its brands, inventories as well as associated management, staff and operations. It also added that Whyte & Mackay will retain its malt distilleries at Jura and Fettercairn and the Invergordon grain distillery.
However, the regulator pointed out that the deal between Diageo and United Spirits will not lead to lessening of competition in the supply of bottled blended whisky to the bars, pubs and restaurants, nor will it create competition concerns in the supply of malt whisky and vodka or the bulk supply of whisky.
Last week media reports had suggested that if the sale of Whyte & Mackay takes place, it is likely to fetch over $1 bln-$1.5 bln in enterprise value. Italy’s Gruppo Campari and various private equity funds are in the running to purchase the brand, said reports.
United Spirits shares closed at 2,622.50 rupees, 3.8% higher than the previous close on the National Stock Exchange. -Cogencis