Financial Daily from THE HINDU group of publications
Wednesday, Nov 10, 2004
Corporate - Mergers & Acquisitions
Jumbo mandates McKinsey to seek bids for SWC liquor biz
Bangalore , Nov. 9
THE Jumbo Group, managed by the estate of the late Manu Chhabria, has mandated McKinsey Singapore to seek bids from interested parties to take a major stake in Shaw Wallace & Co's (SWC) liquor business.
The liquor industry has been buzzing with activity in recent weeks following the news of the mandate to McKinsey even though scepticism remains whether the Jumbo Group would actually proceed with the sale.
"We don't wish to comment on rumours and speculation," a spokesperson for the Jumbo Group said in a reply to a questionnaire from Business Line. However, top group officials confirmed the mandate to McKinsey but refused to comment any further citing "the extremely serious nature of the subject."
Informed sources said that the mandate from Jumbo to McKinsey also makes it clear that no bids from arch-rival UB Group or its Chairman, Mr Vijay Mallya, will be entertained.
Shaw Wallace Distilleries Ltd, the liquor arm of SWC, is the second largest domestic spirits company with annual depletions of nearly 15 million cases, but way behind the leading player, UB Spirits Division , which closed 2003-04 with sales of 35 million cases. If Jumbo Group proceeds with the sale it would be a watershed in the liquor industry's consolidation game.
The late Manu Chhabria acquired SWC from R G Shaw and Sime Derby in 1985. This was part of a series of high-profile acquisitions effected by Manu Chhabria in the 80s when he exploded on the Indian scene after establishing the Jumbo Group in Dubai in 1974.
Likely bidders: According to sources, the likely bidders for SWC's liquor business would include Groupe Pernod Ricard, which owns Seagram in India, and Radico Khaitan, the third largest domestic spirits company. The sources are also not ruling out the possibility of a joint bid, as individual bidders may not be interested in the entire portfolio of Shaw Wallace liquor brands. Besides, the industry sources are betting on a hostile bid from Mr Mallya if the Manu Chhabria estate goes ahead with the mandate given to McKinsey.
The officials at Seagram India said they had evaluated bidding at the early stage but are likely to drop out of the race. But speculation is rife that Pernod Ricard may look at the possibility of a joint bid as its interest lies primarily in Shaw Wallace's premium brands. The promoters of Radico Khaitan offered no comments to a query regarding their interest.
A `valuation' exercise: But a section of the analysts believe that the mandate to McKinsey is nothing but a valuation exercise by the Chhabria estate, with its head Ms Vidya Manohar Chhabria trying to settle a sibling rivalry. They believe that the family is undertaking a valuation of all the group businesses as a prelude to a settlement with Ms Bhavika Godhwani, the estranged eldest daughter of the Chhabria household. It must be mentioned that Ms Godhwani had moved a Dubai court seeking a split in family assets soon after the sudden demise of her father in 2002.
UB Group `not to bid'
THE Vijay Mallya-managed UB Group said it would not bid for Shaw Wallace & Co (SWC)'s liquor business either directly or indirectly.
A UB spokesperson communicated the move even as speculation refuses to die down on Mr Mallya's interest.
Meanwhile, a top group official told this newspaper earlier that they were aware that the Chhabria family was not interested in considering any bid from them.
"We don't see a chance. Moreover, we may not be interested in the entire asset base of Shaw Wallace's liquor business," the official said.
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