History

It all began with 5 breweries in South India. The oldest of which, Castle Breweries, dated back to 1857. United Breweries, as these breweries were named in 1915 has come a very long way.

Soon afterwards, the sight of bullock carts carrying huge barrels or 'Hog's heads' containing beer became a household sight. These carts wheeled their way to the customers, including British troops, living in and around Madras, Bangalore and the Nilgiris. Almost immediately, the brew from UB became a favourite, especially with the British troops. So began the history of Beer in India. And the history of Beer Division of United Breweries!

The company was bought by late Mr. Vittal Mallya in 1947, and since then has never looked back. Today each one of the 32,000 Beer outlets in India sells one brand or the other from United Breweries

United Breweries Group

Founded by Thomas Leishman in1915.

India’s largest brewery

140 brands in portfolio like Bagpiper whisky, McDowell No.1, Director’s special whisky, McDowell No.1 Brandy, Premium Ice, Kalyani Black Label etc..

Domestic market share in excess of 50Synergies from Shaw Wallace Acquisitions

Increased scale – price increase from improved negotiating power.

Increased usage of single Completely Built Unit (CBU) to improve throughput.

Extra New Alcohol (ENA) procurement pattern and spirit movement planning.

Rationalization of terms of trade reduction in spends

Whyte&Mackay

Founded by James Whyte and Charles Mackay in Scotland

4th largest whisky maker in the world with turnover of $283 mn

Major brands like Isle of Jura, Dalmore, Vladvir Vodka and W&M.

No. of employee 700

Working on the philosophy of ‘all good things come to those who wait’

The group Mission Statement embodies these objectives:

← To be the recognized leader in our target markets.

← To be the preferred employer wherever we operate. ← To recognize the value of our human assets. ← To be the partner of choice for customers, suppliers, and

other creators of innovative concepts

About the deal

Structuring of deal By Leveraged Buy Out Debt is secured by the assets of the acquired business & the cash flows of the acquired business will be used to service the debt Deal was worth Rs.9484.84 Crores Special purpose vehicle – “United Spirits” newly launched company UB paid GBP 505 Million which accounted 100% stake in Whyte&Mackay Debt to equity ratio of newly launched company 1.336

Financing of the deal

Acquisition finance to US was provided by ICICI Bank & Citibank Debt of £ 325 Million extended by ICICI Debt of £ 310 Million extended by Citibank

Advisors to the Buyer and Seller Buy side - United Bank of Switzerland Sell side - Citigroup

New Business Initiatives

MOU with Russian Standard Company

China Initiatives

Wine business

New product initiatives

Marketing Initiatives Portfolio Strategy

Luxury Brands

Emerging Premium Brands

Power Brands

Synergies from Acquisitions

Whyte&Mackay Sales climbed around 4% to £149 mn compared with 2004. The deficit in shareholder’s funds was reduced by more than £12 mn to £1.5mn

United Breweries Group

To increase the brand portfolio Enter into the Russian and China

Market

Self sufficient for scotch requirement Brand image of Whyte&Mackay Import tariff avoided and brand can be sold at higher margin

Realization of Intended Object

UB Group becomes the third largest sprit company in the world. Britain’s Diageo Plc is in the first place and France’s Pernod Ricard PA (after buying Britain’s Allied Domecq) is in the second position. Synergy in the merged entity

Increased bargain power with monopolistic customer (Government share of market is 65% and Private market share of about 16%)

Economics of scale of distribution system. Increased bargaining power with the suppliers like bottles Organizational savings arising from consolidation through

elimination of multiple offices and duplication of manpower Reduced promotion spent and improved market realization

Post Merger SituationIn August 2006, Shaw Wallace Financial Services and Shaw Wallace Breweries limited merged. It was declared in 59th AGM of Shaw Wallace in September 2005. It was also declared that combined entry had 130 brands out of which 35 brand fetch 90%

of the profit. McDowell announced that following eight companies were amalgamated into one entity of McDowell India Sprits Ltd and later named as United Sprit Ltd.

1. Phipson Distillery Ltd 2. United Spirits Ltd 3. Herbertsons Ltd 4. Triumph Distillers and Vintners Pvt Ltd 5. Shaw Wallace Distilleries Ltd 6. Baramati Grape Industries Ltd 7. United Distillers India Ltd 8. McDowell International Brands Ltd.

  Long standing legal battle of Shaw Wallace ended on October 1, 2007. It had been settled for mere Rs 34.44 Crore, which is only 7.5% of the original demand i.e. Rs. 464 Crore. This had cleared the barrier of legal merger of Shaw Wallace into UB Group. Shaw Wallace passed board approved merging of the company with United Sprit Ltd. Shaw Wallace shareholder got four share of United Sprit for every 17 share they hold. Gains to shareholder of target and acquirerGains of Target (Shaw Wallace Company)

EPS has increased significantly from 0.02 in 2003-2004 to 6.14 in 2007-2008. Details are given in Exhibit 4.

Net profit also increased from Rs.0.09 Crore in 2003-2004 to Rs. 29.48 Crore in 2007-2008. Details are given in Exhibit 5.

Operating profit margin, Gross profit margin and Net profit increased significantly. Details are given in Exhibit 5.

Net Cash flow from operating activity also increases. Details are given in Exhibit  7

Dividend percentage also increased. Details are given in Exhibit 8

Stock Price of Shaw Wallace was below Rs. 250 before Jan 2005 but it was more than Rs 250 at after June 2007. Merger has created a large amount of share holder’s value for Shaw Wallace Company.

 A study by Assocham said that Shaw Wallace was in the 10food and beverages company in terms of market capitalization. It had given 261 percent return in 2004-2005 against 123 percentage return in 2003-2004. It occupied last slot in terms of market capitalization in 2003-2004