Diageo Said to Discuss Whyte & Mackay Sale to Philippines

Diageo Plc’s (DGE) United Spirits Ltd. (UNSP) is holding talks to sell the Whyte & Mackay spirits business to Alliance Global Group Inc., the Philippines-based owner of Emperador brandy, people familiar with the process said.

The transaction may value the whisky maker at about 400 million pounds ($675 million), according to the people, who asked not to be identified because discussions are private. Talks are advanced, though they could still fall apart over matters including valuation, the people said.

Diageo, the world’s biggest distiller, acquired Whyte & Mackay last year when it purchased a controlling interest in W&M’s Indian parent, United Spirits. The liquor maker subsequently offered to sell most of the business to assuage concerns by the U.K. Office of Fair Trading that the takeover could lead to higher prices in the U.K. for blended whiskey.

The OFT said in November that Diageo’s proposal included the disposal of Jura malt whisky and all its blended brands, including Whyte & Mackay and whiskies it sells to retailers to bottle under their own labels. The Dalmore and Tamnavulin malt distilleries would be retained, the regulator said.

Representatives for Diageo and United Spirits declined to comment on the sale process. Officials at Alliance Global didn’t respond to repeated requests for comment.

Billionaire Owner

“Many of the people said to be involved in this deal were probably more interested in the malt whiskies like Jura and possibly Dalmore, while a lot of what Whyte & Mackay sells is bulk grain whiskies to supermarkets,” said Trevor Stirling, an analyst at Sanford C. Bernstein in London. “It might be better to sell to a buyer like Alliance who also wants to work with those grain whiskies.”

In addition to owning Emperador Inc., the world’s largest maker of brandy, Alliance Global has interests in property development, food and gaming. Emperador, controlled by billionaire Andrew Tan, said April 25 that first-quarter sales rose 17 percent to 7.7 billion pesos ($173 million) and that it was seeking to expand globally.

Emperador shares rose to a four-month high in Manila on March 6 after the announcement of an agreement to distribute Diageo’s brands in the Philippines.

Diageo owns about 29 percent of United Spirits, which combined with voting and other governance arrangements with former owner Vijay Mallya was enough for control. Diageo last month announced a further open offer to United Spirits investors, which could lead to it holding more than 50 percent.

United Spirits bought Glasgow, Scotland-based Whyte & Mackay for 595 million pounds in 2007.

Diageo shares were almost unchanged at 1,824.5 pence at 2:30 p.m. in London. Emperador shares fell 2.5 percent to 12.4 pesos at the close of trading in Manila.

To contact the reporters on this story: Kiel Porter in London at kporter17@bloomberg.net; Manuel Baigorri in London at mbaigorri@bloomberg.net; Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net; Celeste Perri at cperri@bloomberg.net Paul Jarvis

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