Interest In Whyte & Mackay From Former Owner

Investment firm Vasari is reported to be interested in buying Scotch whisky maker Whyte & Mackay from its parent company Diageo, following competition concerns over its recent acquisition of United Spirits Limited (USL).

Vasari is chaired by former Whyte & Mackay CEO Vivian Imerman, who sold the company to USL in 2007 for US$972.6mn. Vasari, which has focussed recent investments on food and beverage companies in Africa and Asia, is interested in Whyte & Mackay mainly because of the potential offered by beer and spirits in African and Asian markets. CEO Imerman has a history in the food and drink sector, having turned round the fortunes of Del Monte and Whyte & Mackay as CEO in the past.

Early in 2012, Vasari, along with Duet Group and TIRET Group, invested into the Ethiopian brewer Dashen Brewery with the largest private equity investment in the country at the time. Dashen is the only independent brewery in Ethiopia, with a market share of almost 20%. Earlier in 2013, Vasari won a bidding war for Cairns Zimbabwe, a struggling food manufacturing firm listed on the Zimbabwe Stock Exchange. Vasari's experience within the emerging markets food sector and Imerman's ties with Whyte & Mackay will make the investment firm a natural front runner for the distiller.

Growth In Whisky
Selected Countries: Spirits Value Sales Growth (US$, & chg y-o-y)

Diageo may be forced to sell Whyte & Mackay as the company's recent takeover of USL has given the global distiller too a great share of the blended whisky market, currently standing at 40%. Whyte & Mackay has limited brand recognition worldwide, unlike Diageo's flagship whisky brand of Johnnie Walker, though losing exposure to the fast- growing whisky market will come as a blow to the company. Scotch sales accounted for 50% of Diageo's net sales growth in FY13, and 56% of its gross profit growth. As we have previously expressed (see 'Global Whisky Market Booming', 15 October 2013), we hold the view that value sales of whisky will be one of the fastest growing among alcoholic beverages in both the developed and emerging world (see chart above).

Even Global Exposure In Whisky
Diageo- Scotch Net Sales By Region (% of total)

Though it remains to be seen if Diageo does indeed have to sell Whyte & Mackay, estimates of the sale price vary wildly, from US$500mn to US$1,000mn. The global whisky market is forecast to offer some of the best value growth across the alcoholic beverages sector, and can continue to do so as premiumisation offers greater avenues for growth. A top end price of almost US$1bn, needs greater justification.

This article is tagged to:
Sector: Food & Drink
Geography: United Kingdom

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