McDowell & Co Limited, the flagship of Vijay Mallya's UB Group, has made an open cash offer of Rs 2.5 bn before the Calcutta High Court for beleaguered rival Shaw Wallace's (SWCs) Royal Challenge, Director's Special and Haywards brands.
Shaw Wallace has a major presence in premium whisky and beer segment in India. Its brand Royal Challenge commands over 50% market in the premium whisky segment. Similarly, the Haywards brand has cornered a significant 45% of the domestic strong beer market. Overall, the 3 brands in question account for 8% of the total spirits market in India.
SWC is mired in a debt trap. The recent dismissal of the special leave petition moved by SWC for a fresh meeting with its creditors triggered off the UB Groupís move. SWC wanted its creditors to consider a repayment scheme prepared in 1997. Earlier, the Calcutta High Court rejected the scheme because it did not have the support of the majority of the unsecured creditors. In FY97, SWC owed its creditors about Rs 1.8 bn. Currently, the total debt owed by SWC to creditors stands at around Rs 2.6 bn.
If the court decides to take on McDowell's offer, the acquisition would allow the UB Group to plug gaps in its portfolio, as it is rather weak in the premium whisky and strong beer segments. It will strengthen its presence in the premium whisky market (Royal Challenge), the regular whisky segment (Director's Special) and the strong beer market (Haywards).
But Shaw Wallace isn't going to take this lying down. The company has already filed a fresh repayment plan with the court, in which it has relented to the creditor demands on interest payments and has dropped names of six group companies, whose inclusion had drawn strong protests earlier. If these 3 brands were to pass onto the UB Group, SWC would lose over 70% of its current revenue streams.
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