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 50

Synergies 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 Situation

In 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 acquirer

Gains 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