Vijay Mallya's United Spirits Ltd has acquired Tamil Nadu based Balaji Distilleries in an all stock deal. The Board of United Spirits has recommended an issue of two equity shares of United Spirits for every 55 held in Balaji Distilleries. On the basis of Friday's closing price of Rs 850 per share of United Spirits, the deal values Balaji Distilleries at approximately Rs 164 crore.
Balaji was declared a sick company in January 2007 and came under the purview of Board for Industrial and Financial Reconstruction (BIFR). The BIFR is still to give its approval to the acquisition, and so do Balaji's creditors, which includes Standard Chartered Bank. While promoters of Balaji hold a 33% stake in the company, ICICI Bank is the bigggest non-promoter shareholder with a 14% stake.
Balaji's share prices reacted negatively to the deal, falling by 4.73% to Rs 25.2 per share. The company has a market capitalisation of Rs 133.5 crore at the current share prices.
With this deal United Spirits will have a production facility in every state of India. With the acquisition of Balaji Distillery, United Spirits will add a distillery which has a capacity of 10 million cases per annum and a brewery has capacity of 12 million dozens per annum. United Breweries has a 51% market share in Tamil Nadu, and its sales are growing by 15% in the state. As Balaji Distillery was the contract manufacturing unit for United Spirits in Tamil Nadu and contributed 60% to latter volume, the acquisition seemed only natural.
Vijay Mallya has been expanding his liquor empire through acquisitions for past several years. In 2005, he completed acquisition domestic spirits major Shaw Wallace & Co Ltd for Rs 1,545 crore. Then last year Mallya acquired the Scottish distiller Whyte and Mackay for £595 million (Rs 4,800 crore).
PricewaterhouseCoopers and Ambit Corporate Finance were the advisors to United Spirits on the deal. Grant Thornton and Lodha & Co advised on the valuation of Balaji Distilleries.