February 10, 2014 - The UK’s Office of Fair Trading will not issue its opinion on Diageo’s proposal to sell approximately 70% of Whyte & Mackay until the company has found a potential buyer. The regulatory agency released a redacted version of its opinion on Diageo’s acquisition of W&M parent United Spirits late last week, including its expectation that any buyer would have to commit to keeping Whyte & Mackay’s private label whisky business in place. OFT policy is that so-called “undertakings in lieu” proposals will not be considered for approval until after a sale proposal can be reviewed.
In November, the OFT rejected Diageo’s plan to acquire a controlling stake in India-based United Spirits on the grounds that it would reduce competition in the UK’s Blended Scotch whisky market, along with the private label market. Regulatory review found Diageo’s Bell’s brand overlaps with Whyte & Mackay’s namesake blend, and allowing the two brands to be owned by the same company could distort the market. In addition, the OFT found that other bulk whisky providers would not be able to supply the private label market should Diageo decide to end Whyte & Mackay’s role in that sector. The ruling has been placed on hold after Diageo proposed to resolve the agency’s concerns by sell off all of Whyte & Mackay except for the Dalmore and Tamnavulin malt whisky distilleries.
While United Spirits has hired an investment banker to review sale proposals, no offers have been publicly announced. Suntory denied reports in January that it would make a bid for the entire Whyte & Mackay unit. Former W&M owner Vivian Imerman’s Vasari private equity group expressed interest in December, but has not commented since then. Diageo and United Spirits have also declined to comment on the proposal.
The OFT’s entire report — redacted to remove trade secrets and confidential information — is available here.