Mallya flays Shaw Wallace beer unit deal

United Breweries Group Chairman Vijay Mallya has said the proposed joint venture between SABMiller and Shaw Wallace Breweries was not in the best interest of the public shareholders of Shaw Wallace & Co. Shaw Wallace Breweries is a 100 per cent subsidiary of the latter.

"The proposed venture would have been welcome as an instance of healthy competition, except that the move through an unlisted company has deprived the 46 per cent public shareholders of Shaw Wallace & Co the benefit of this new venture," Mallya said in a statement issued on Sunday.

He added that this was also the subject of a suit filed by McDowell, a UB Group company, in the Bombay High Court.

McDowell & Co Ltd, as a shareholder in Shaw Wallace & Co, had sought an ad interim injunction in October 2002 against the restructuring of Shaw Wallace into three companies -- Shaw Wallace Distilleries, Shaw Wallace Breweries and a holding company for the two -- on the grounds that it was not in the interest of the shareholders.

A spokesperson for Shaw Wallace & Co said: "Over the past few years, the robust growth at Shaw Wallace's beer business has left Mallya confused and confounded. Rather than fight Shaw Wallace imaginatively in the market, Mallya has used every trick in his bag to stall the progress of Shaw Wallace, including the formation of the beer joint venture.

His litigation against Shaw Wallace at the Bombay High Court failed to give him any interim relief and that hurt him even further.

He claims to espouse the cause of Shaw Wallace shareholders but the ground reality is otherwise. The share price of Shaw Wallace has appreciated 33 per cent in the days after the joint venture with SABMiller was announced.

SABMiller was earlier in talks with the UB Group for a similar joint venture, but the talks fell through and the UB Group tied up with Scottish & Newcastle.

Talking to Business Standard a few weeks ago, Mallya had said this was because the 'chemistry' between him and the Scottish & Newcastle brass worked better.

In today's statement, Mallya pointed out that though the proposed investment placed SABMiller as the second largest brewer in India, it would remain significantly smaller than market leader UB Group, which sold approximately 40 million cases a year, produced at 18 owned breweries and six contract breweries across India.

He added that since SABMiller, being a professionally managed company, would be looking at generating a healthy financial return on its investment, reckless and wasteful promotional expenditure by Shaw Wallace & Co in a futile attempt to chase UB volumes would be replaced by a more prudent marketing strategy.