UB set to buy two south breweries

The Vijay Mallya-owned United Breweries is buying two south-based breweries in a bid to expand its capacity.

The company is set to take over the D K Adikeshavulu-owned Karnataka Breweries & Distilleries for about Rs 180 crore (Rs 1.8 billion).

UB has a contract arrangement for manufacturing Kingfisher with Karnataka Breweries, which has a capacity of around 800,000 hectolitre.

The acquisition would be funded from the proceeds raised through UB's Rs 940 crore (Rs 9.4 billion) deal with British brewer Scottish & NewCastle and the group's beer business. Post acquisition, UB intends to expand Karnataka Breweries capacity to 10 lakh (1 million) hectolitre.

Further, the company is also in talks with Balaji Distilleries to acquire its half a million hectolitre brewery in Chennai.

Ravi Nedungadi, group president and chief financial officer of UB group said, "The move is to consolidate our brewing capacities in this region."

Meanwhile, Mallya is looking at consolidating his spirits business, comprising McDowell & Company, Herbertsons and Triumph Distillers & Vintners, under United Spirits.

UB is buying out TDV managing director Deepak Roy's 15 per cent in the company. TDV was floated by Roy for acquiring his former employer -- United Distillers & Vintner India's Indian-made foreign liquor business in 2002. Roy later sold 85 per cent to Mallya.

"The consolidation of the spirits business would help in terms of infrastructure (corporate offices), overheads among other things, thus bringing down costs," Nedungadi said.

However, the merger would take some time considering that the issue of complete control over Herbertsons is still on. Mallya and Kishore Chhabria, vice-chairman of Herbertsons is involved in a legal battle on this issue.

Nedungadi said, "If things go well, then we expect the  merger to take place in the current financial year." Mallya has also put in a bid to acquire Shaw Wallace Distilleries.

If it succeeds, Mallya would continue to be the undisputed leader in the spirits business. The group has also put in a bid through its special purpose vehicle, United Spirits.