The Vijay Mallya-controlled United Breweries' $300 million acquisition of Shaw Wallace & Co from the Chhabria family is the second most valuable liquor deal in the world in recent years, sources close to the transaction claimed.
"A comparison with global large size (over $100 million) control acquisitions of spirits manufacturers' announced in the past five years shows that at a transaction value/EBITDA (earnings before interest, taxes, depreciation, and amortisation) of 17.8, this will be the second richest large size global sale of a spirits manufacturer in recent history," the sources said.
Only LVMH's $600 million acquisition of Glenmorangie in 2004 had a higher transaction value/EBIDTA of 23.3.
The deal, which is projected to reach financial closure on June 30, will be the largest spirits transactions to have taken place in Asia in recent times, the sources said. The last big spirits transaction when Asahi Breweries acquired Nikka Whisky Distilling Co in Japan for $172 million in October 2000.
"The agreement with UB has created dramatic value for shareholders of SWC as the open offer price is roughly five times the share price a year ago," the sources added.
The Chhabria family had earlier chosen to disinvest in SWC's distillery subsidiary, Shaw Wallace Distilleries Ltd, for which the highest bid received stood at Rs 1251 crore (Rs 12.51 billion).
However, later on the Chhabrias offered to sell their nearly 55 per cent stake in the parent company, SWC, and received a revised offer from the UB Group at Rs 1,300 crore (Rs 13 billion).
"By implication, the buyer would additionally need to settle the litigated outstanding IT dues of SWC that may eventually amount to any figure between Rs 400 and Rs 900 crore (Rs 4-9 billion)," the sources added.
According to the sources, what helped Chhabrias in getting such a good valuation was its strong portfolio of liquor brands. "In the premium segment, for instance, Antiquity and Royal Challenge whiskies of SWC enjoy a clear monopoly.
"Antiquity accounts for 90 per cent of the super premium whisky segment and Royal Challenge is the only millionaire brand in the premium whisky segment," the sources added. Director's Special is also a leading brand in the regular segment.
It may be recalled, the UB Group had offered to pay Rs 250 crore (Rs 2.5 billion) in the mid-1990s to acquire Haywards, Royal Challenge and Director's Special brands of SWC. But the offer was turned down by SWC.
The UB-SWC agreement is the second big-time M&A deal that Chhabrias have pulled off. Less than two years ago, SWC divested 50 per cent stake in brewery business to SABMiller, the world's second largest brewer, for Rs 641.71 crore (Rs 6.42 billion).
"The joint venture was hailed as the highest value addition ever happened in the world in the brewery sector," the sources added.