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Wednesday, July 04, 2001



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MBL hidden assets attract SAB bid

Boby Kurian


AS finer details emerge on South African Breweries India Ltd's (SAB) acquisition of Mysore Breweries Ltd (MBL), it is increasingly clear that the valuation, described as a ``windfall'' for the promoters of the acquired company, was influenced by hidden a nd liquid assets.

SAB, on June 27, inked an agreement to buy 75.77 per cent stake in MBL for a consideration of Rs 108 crore. The move apparently gives SAB access to two technically-sound breweries located in Aurangabad and Bangalore with a combined annual brewing capacit y of 4.8 lakh hectolitres. The deal also gives the multinational control over the second largest selling strong beer brand, Knock Out.

However, the deal will see MBL's sizable hidden assets, including intangible resources, move into SAB's fold. The company's liquid assets are pegged at around Rs 14 crore.

Added to this are the company's real estate investments in Bangalore, Hyderabad and the six-acre property at Kunigal in Karnataka, from where it sources the mineral water brand. The land on which its Bangalore brewery is located probably has a market val ue in the vicinity of Rs 20 crore.

``The investments made by MBL promoters are mostly in the name of the company, which makes it a well-earned valuation,'' an analyst involved with the agreement said. ``Unlike other mid-sized brewers, MBL has continued to make profit. More importantly, th e liquid assets have not been stripped away,'' sources added. Knock Out is being touted as an inherently strong brand built over 15 years with marketing investments close to Rs 100 crore.

But what is likely to prove more crucial are the long-term strategic benefits that may come SAB's way. MBL's well-oiled trade network across Maharashtra, Andhra Pradesh and Karnataka will outright make SAB a force to reckon with.

These three States together account for nearly 50 per cent of the overall domestic beer market. Moreover, MBL may soon obtain a licence from the Andhra Pradesh Government to set up a 2-lakh hectolitre greenfield brewery in the outskirts of Hyderabad.

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