In a unique leveraged buyout, the Vijay Mallya-owned UB Group is mobilising more than half the acquisition cost of Whyte & Mackay against the Glasgow-based firm's huge inventory that consists of vintage scotch valued at nearly £300 million (Rs 2,520 crore).
In leveraged buyouts, companies finance acquisitions using the target company's future cash flows. All recent big deals, including Tata Steel's acquisition of Anglo-Dutch steelmaker Corus Group, have taken this route. However, this is the first time that the target company's inventory is being used to raise funds in a cross-border M&A.
Whyte & Mackay's brands include the blended Scotch whisky, Dalmore single-malt whisky, Vladivar vodka and Isle of Jura single malt whisky.
The company has a huge collection of five- to 25-year vintage scotch whisky. More than half the all-cash acquisition cost of around £550 million (Rs 4,620 crore) will be mobilised against this inventory.
Bankers close to the development said the UB Group and its banks, Citigroup and ICICI Bank, have finalised around £625 million (Rs 5,250 crore), $75 million of which will be set aside for working capital requirements. When contacted, a UB Group executive declined to comment.
The acquisition is expected to be announced next month. While UB Group started due diligence on Whyte & Mackay in mid-February, the deal is taking time to be completed on account of complex legal implications involving India's largest cross-border deal in the liquor business.
Mallya reportedly agreed to pay £475 million in November last year, which was rejected by Whyte & Mackay's South Africa-born owners, Vivien Imerman and his brother-in-law Robert Tchenguiz.
Once signed, the acquisition will follow UB's failed attempt to acquire Taittinger, the world's sixth largest champagne company, for £400 million (Rs 3,360 crore) last year.
This acquisition will mark the end of any significant whisky group other than Edrington, owner of Famous Grouse, Macallan and Highland Park, being controlled from Scottish headquarters.