Diageo May Sell Whyte & Mackay on Competition Concern

Diageo Plc, the world’s biggest distiller, offered to sell most of the Whyte & Mackay whisky business it gained from the takeover of India’s United Spirits Ltd. after U.K. regulators expressed competition concerns.

The offer covers Whyte & Mackay’s Invergordon, Jura and Fettercairn distilleries in Scotland, Diageo said today in a statement. The Dalmore and Tamnavulin distilleries that supply United Spirits and international markets would be retained. The Office of Fair Trading said in a separate statement that it’s considering the London-based company’s proposal.

After taking evidence from retailers, the OFT concluded that the purchase of Whyte & Mackay may lead to a “substantial lessening” of competition in the supply of blended whisky to retailers, which could potentially lead to higher prices.

Diageo, the maker of Johnnie Walker whisky and Smirnoff vodka, agreed this year to buy a controlling stake in Indian entrepreneur Vijay Mallya’s United Spirits for about 52.4 billion rupees ($838 million) to grab more of the whisky-loving Indian market. Consumer-goods companies are expanding in emerging economies where booming growth is spurring an increase in middle-class consumers with more disposable income.

As well as Johnnie Walker, the world’s biggest whisky brand, Diageo also sells malt whiskies including Caol Ila and Talisker and blended brands such as Buchanans and J&B. United Spirits, the maker of Bagpiper Indian whiskey, bought Whyte & Mackay in 2007 for 595 million pounds ($963.5 million).

The OFT announced it was mulling whether the deal could substantially lessen U.K. competition in July. Diageo Chief Executive Officer Ivan Menezes said Nov. 19 that “the core asset of what we’re buying in United Spirits we’re still very bullish about,” referring to the Indian operations.

Diageo shares were little changed on the announcement, trading up 1.2 percent at 2,000 pence at 12:23 p.m. in London.

(Corrects currency conversion in fourth paragraph.)
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