UB Group is consolidating its entire brewery business under United Breweries Ltd (UBL), the country’s largest brewer and a public listed company it jointly promotes with Heineken. UBL is merging a clutch of subsidiaries and joint venture firms that will maintain both co-promoters holding Heineken (through Scottish & Newcastle) and Vijay Mallya-promoted UB Group around 37% each in the company. At present both UB Group and Heineken own 37.49% stake each.
As per the proposed transactions, five companies are being merged with UBL including its wholly owned subsidiary Associate Breweries & Distilleries Ltd. The other firms include Millennium Alcobev Pvt Ltd (MAPL) which is a 50:50 JV between UBL and Heineken Group. MAPL has three operating companies with breweries in Haryana, Maharashtra, Andhra Pradesh and Tamil Nadu.
These breweries have a combined capacity of 33 million cases or about a tenth of total brewing capacity in the country. Besides contract manufacturing UBL’s beer brands, this JV and its operating firms also own their own labels such as Sand Piper, Kalyani Black Label Strong, Marco Polo, Guru, Zingaro that are marketed by UBL.
In a statement UB Group chief Vijay Mallya said, "The combined entity will create significant value for all shareholders and will help in optimising revenue, cost and capital synergies...The integration of brewery assets will further strengthen the relationship between Heineken and the UB Group, which have significant growth plans for the coming years."
The company disclosed the merger will create a total of 15 million new shares (based on independent valuations by Grant Thornton and SSPA & Co besides Ambit Corp giving fairness opinion on the swap ratio) and it will create UBL Benefit Trust that will apparently hold around 6 million shares (treasury stock). Both Heineken and UB Group will be getting fresh allotment of around 4.5 million shares each.
Meanwhile, the flagship firm of the group United Spirits Ltd has struck a deal to acquire majority stake (almost the entire holding of promoters Rao Family) in small size public listed liquor company Pioneer Distilleries Ltd for Rs 74 crore ($15.8 million). Pioneer, that reported net sales of around Rs 48 crore with net profit of Rs 3 crore, is into extra neutral alcohol, the primary ingredient used in churning out Indian Made Foreign Liquor(IMFL).
The deal has been struck at a 46% premium to the last closing price of Rs 69 for Pioneer. The company’s shares shot up 5% hitting the upper circuit after the United Spirits deal announcement and last traded at Rs 72.05 at BSE.
Pursuant to this, United Spirits will also make an open offer to the shareholders to buy another 20% stake that can cost another Rs 26 crore, making it a Rs 100 crore deal.
Pioneer has a spirits facility around 45 km from Nanded in Maharashtra. Besides distilling capacity that uses molasses and grain as feedstock, Pioneer also has an absolute alcohol facility besides LoI for bottling IMFL from grain.
The acquisition will further push up in-house primary spirit distilling capacity by 22.5% and enhance raw material security. This is yet another deal after United Spirits acquired Tern Distilleries near Vishakhapatnam in Andhra Pradesh.