* Offer includes all assets apart from two malt distilleries
* Analyst sees sale price below what United Spirits paid
* Diageo shares up 1.1 percent
By Martinne Geller
LONDON, Nov 25 Britain's Diageo has
offered to sell most of Whyte & Mackay's whisky assets to
address competition concerns arising from its July acquisition
of a controlling interest in India's United Spirits.
Diageo, the world's biggest spirits maker, said on Monday
that it would assist Britain's Office of Fair Trading with its
evaluation of the United Spirits deal and that a further
announcement would be made in due course.
In July Diageo took a 25 percent stake in United Spirits,
part of industrialist Vijay Mallya's empire and owner of Whyte &
Mackay, which sells a branded Scotch whisky but has a bigger
business supplying bulk whisky that other drink makers brand as
However, the British competition authority said on Monday
that Diageo's lower-end Bell's whisky competes with Whyte &
Mackay's own-label and branded whisky and that the merger may
lead to "a substantial lessening" of competition.
"These companies are two of the leading suppliers of blended
bottled whisky in the UK, especially to supermarkets and other
large retailers," said OFT Chief Economist Chris Walters.
Diageo has offered to sell Whyte & Mackay's Invergordon,
Jura and Fettercairn grain distilleries, which account for the
bulk of its blended Scotch. It would like to keep the smaller
Dalmore and Tamnavulin malt distilleries.
WIDE VALUATION ESTIMATE
Because the Whyte & Mackay brand is not very strong, it is
unlikely to fetch as high a premium as other spirits sales, said
Bernstein analyst Trevor Stirling.
"There are very few precedents for this," Stirling said.
Based on his estimate of Whyte & Mackay's earnings and
recent deal multiples, Stirling said the company could be worth
roughly 350 million to 600 million pounds ($566 million to $971
Even at the top end that would be less than the $1.2 billion
Mallya spent buying Glasgow-based Whyte & Mackay in 2007.
Stirling said that likely buyers could be Beam Inc
or Bacardi, since both sell blended Scotch but lack their own
grain distilleries. Beam declined to comment and a Bacardi
spokesman wasn't immediately available.
The OFT's duty to refer the merger to the Competition
Commission is suspended while it considers Diageo's remedy.
Diageo's whisky portfolio includes single-malt whisky brands
such as Lagavulin and Talisker and blended brands including
Johnnie Walker, J&B and Buchanan's.
Diageo Chief Executive Officer Ivan Menezes last week told
reporters in London that "whatever the outcome (of the OFT
review), the core asset of what we are buying in USL, we are
still very bullish about."
Diageo shares were up 1.1 percent at 19.98 pounds by 1507