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July 17, 2014 – Filipino billionaire Andrew Tan’s $724.5 million (USD) acquisition of Whyte & Mackay is a step closer to completion. The UK’s Competition and Markets Authority has given tentative approval to Tan’s deal to buy the Scotch Whisky and gin producer from Diageo and United Spirits of India, and has opened a two-week public comment period before giving final approval. Tan’s Alliance Global Group was selected in May as the high bidder for Whyte & Mackay, and Tan will merge the unit into his Emperador brandy unit assuming final approval from the CMA and the Reserve Bank of India. Indian regulators must still approve the sale, as it will require loans from United Spirits to Vijay Mallya’s USL Holdings Ltd. to be written off. In addition, a court challenge to Diageo’s acquisition of some USL shares pledged as collateral by Mallya-related businesses is still awaiting a final ruling by India’s Supreme Court.
Diageo and United Spirits agreed to put Whyte & Mackay up for sale following a ruling by the former Office of Fair Trading that Diageo’s acquisition of a controlling stake in United Spirits would hurt competition in the UK’s market for blended Scotch whiskies. Whyte & Mackay supplies bulk whisky for private-label retail brands, along with its own branded whiskies, and the OFT ruled that combining the unit with Bell’s and Diageo’s other blended Scotch brands would be anti-competitive. The ruling was stayed while Diageo and United Spirits sought a buyer for Whyte & Mackay. Earlier this month, Diageo completed its acquisition of a majority of the outstanding shares in United Spirits, and has now taken control of the Bangalore-based company.
Diageo’s filing with the CMA proposes to complete the deal by September 9, with the current Whyte & Mackay management team to stay with the unit as Alliance takes control. In addition, Diageo will not be allowed to acquire any interest in Whyte & Mackay for ten years following the transition, and its employees will not be allowed to become managers or directors of Whyte & Mackay. The agreement does allow for Diageo to buy bulk whisky from Whyte & Mackay, and Tan’s purchase agreement includes a three-year contract to supply malt whisky from the Dalmore and Tamnavulin malt whisky distilleries for use in United Spirits-produced whiskies. Diageo had originally planned to hold on to both distilleries following a sale, but agreed to include them as part of the Alliance bid.
The Authority’s public consultation period ends August 1, and a CMA spokesman told WhiskyCast in an email that the agency is prepared to give final approval barring any major objections. Diageo spokespersons have previously said the company will have no further comment while the CMA’s review process is underway.