Shaw Wallace Our Philosophy .

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As one of India's foremost liquor manufacturers and exporters with a host of brands that have captured the imagination and taste of alcohol consumers in the country as well as abroad, we believe, it is superior quality that effectively underlines our primary goal of attaining a larger market share. For the past 116 years of existence, we have carefully cultivated and abided by a principle that has been synonymous with a tradition of excellence, upholding high standards be it in our products or in our customer focus. One need not settle for anything less than the very best. To that end, our customers in India and abroad are treated to a medley of only the finest selection of alcoholic beverages, carefully brewed and packaged under our label. In the years to come, we at Shaw Wallace aim to explore and conquer potential markets across the world, besides increasing our domestic production in keeping with the evergrowing demand for our products within India. A constant strive for perfection along with a doctrine that stresses on consistent innovation and improvement, we at Shaw Wallace intend to surpass the most stringent standards of quality in liquor manufacture and exports.

UB Group: The UB Group (United Breweries) Group is a multi-faceted conglomerate with business interests in Beverage Alcohol, Pharmaceuticals, Media, International Trading, Aviation, Fertilizer, Research & Development, and Infrastructure Development. The UB Group was founded by a Scottish gentleman Thomas Leishman in 1915. The company used to manufacture beer at that time and took its initial lessons in manufacturing beer from South Indian based British breweries. In August 1947, Vittal Mallya became the company's first Indian director. A year later he became the Chairman of the Group. United Breweries came into limelight by manufacturing bulk beer for the British troops, which was transported in huge barrels. In 1950s and 60s, the group expanded rapidly and made several acquisitions. McDowell was added as one of the Group subsidiaries. This helped UB Group to venture into wines and spirits business. Kingfisher, the Group's most visible and profitable brand, made its entry in the sixties. Thereafter, the Group moved into agro-based industries and medicines when it acquired Kissan Products and formed a long-term relationship with Hoechst AG of Germany to promote Aventis Pharma. After Vittal Mallya's death in 1983, his son Vijay Mallya assumed the mantle of the group. Vijay Mallya inducted professional management and consolidating the Group into individual

Some of the famous brands of the UB Group are: Bagpiper Whisky. the company that owns and manages daily newspaper. Council for Scientific and Industrial Research (CSIR) and the Ministry of Finance. the Group entered aviation sector with the launch of Kingfisher Airlines Limited.1 Whisky. of Biotechnology (DBT). The Company also exports Pharmaceutical Products and customized perfumeries. Business Interests of UB Group: Beverage Alcohol: The UB Group is 3rd largest spirits marketer in the world. Director's Special Whisky. 800 MT of Ammonia and 3. Research & Development: Vittal Mallya Scientific Research Foundation (VMSRF) was established in 1987 with the objective of developing newer and novel technologies that will have substantial application in industry and health care. The foundation is it is recognized by the Departments of Scientific & Industrial Research (DSIR).000 MT of Urea. It develops and markets branded prescription drugs and vaccines. Fertilizer: Mangalore Chemicals & Fertilizers Limited is under UB Group's management. After India adopted economic liberalization in 1991. UB Group is the third largest manufacturer of Spirits products in the world. Dept. International Trading: The Group's company UB Global Limited is a recognized export house engaged in the export of Beer.80. Govt. The company offers 140 brands at varying price points. Pharmaceuticals: The group's company Aventis Pharma Limited is the second largest pharmaceutical multinational in India. In 2005. It has a manufacturing capacity of 2. of India. McDowell's No. the UB Group decided to retain interests in only those businesses that were globally competitive and did not depend upon fiscal tariff protection. The Asian Age.1 Brandy and McDowell's Celebration Rum. With in a short time the airlines has captured an impressive market share and has established a niche identity for itself. The paints business was divested for significant value in 1996. with overall sales of 60 million cases. Aviation: UB Group entered aviation sector in 2005 with the launch of Kingfisher Airlines . Media: The UB Group also has a shareholding in Asian Age Holdings Ltd. Leather Footwear and Processed Foods. UB Group acquired the global Berger Paints Group with operating companies across four continents.operating divisions. In 1988. McDowell's No.17. Spirits. Today.

He also said that Whyte & Mackay. UB Group President and Chief Financial Officer Ravi Nedungadi said that the merger would begin soon. We need to consolidate these acquisitions and will thrust forward. he said. The move will add another Rs 60 crore to United Spirits bottomline of close to Rs 500 crore and around Rs 350 crore to the topline. which operate in the volume segment. The Rs 4.Limited.000 crore (Rs 40 billion) United Spirits [ Get Quote ] will be merging Shaw Wallace [ Get Quote ] with itself. 2007 It is consolidation time for Mallya's firm The Rs 4. The move will add another Rs 60 crore (Rs 600 million) to United Spirits' bottomline of close to Rs 500 crore (Rs 5 billion) and around Rs 350 crore (Rs 3.300 crore in mid-2005 . Shaw Wallace Breweries to merge with UB Group BS Reporter / Bangalore November 29. which was recently acquired for around $1. The airlines recently acquired 25% stake in Deccan Airlines. United Spirits. a number of acquisitions has been completed over the last 18 months. had acquired Shaw Wallace for around Rs 1. Kingfisher Airlines has captured an impressive market share and has established a niche identity for itself. had acquired Shaw Wallace for around Rs 1.5 billion) to the topline.000 crore United Spirits will be merging Shaw Wallace with itself. . UB group president and chief financial officer Ravi Nedungadi said that the merger would begin soon. To ensure completeness of product offering as well as to ensure a permanent supply of critical inputs. UB Group Chairman Vijay Mallya.300 crore (Rs 13 billion) in mid-2005 . a part of the UB Group. Bouvet Ladubay and Liquidity have been acquired in the spirits business. United Spirits. Brands from Shaw Wallace. said that the next financial year would be a period of consolidation for the group. Whyte & Mackay.2 billion. would stay on as a subsidiary. United Spirits is currently the third-largest distiller in the world with sales of over 66 million cases powered by 15 millionaire brands. while we acquired 46 per cent in Deccan Aviation. a part of the UB Group. have contributed to this growth. speaking to reporters after United Spirits annual general meeting.

Shaw Wallace integration underway news 07 July 2008 The UB Group has announced plans to invest Rs1.Cumulatively. "The work has started very closely between UB companies. QIP and warrants across United Breweries. So we can expect that synergy to flow straight away. For the current financial year the Vijay Mallya-led group has a capital expenditure plan of Rs488 crore. Nedungadi told CNBC-TV18 in an interview that the company was positive about the acquisition of the Shaw Wallace package. he says.000 crore in the next three years to raise its brewing capacity by 20 per cent from its current 60. The consolidation of the package will depend on the time when UB Group is able to understand the actual structure of the Shaw Wallace group and resolve all issues there.000 crore through rights. UB to to raise brewing capacity by 20 per cent. cash would come in from the sale of non spirited assets. In order to opt for that loan.50 lakh hecto litres per annum. UB is setting up a facility in Andhra Pradesh. Right now it comes to over Rs 1000 crore." On the debt-equity ratio. We have mandated .25 lakh hecto litres to 71. We had to simplify and reduce it as much as possible. This will have an annual production capacity of 60 lakh cases per annum to begin with and 120 lakh cases eventually. According to UB Group chief financial officer Ravi Nedungadi. UB Group is raising close to Rs 2." he told the business channel. and reduce it. only when we have got all the swap ratios and the equity valuations in. We know that the work is going on. Yesterday. In terms of the legal merger of companies. And this is very much according to the plan. "We have borrowed Rs 1545 crore for the total acquisition of the Shaw Wallace package. The company also plans to have a greenfield plant in Karnataka with a capacity of 30 lakh cases a year. "We can talk about the combined debt equity position. Nedungadi also disclosed that the process of management integration and the integration of the market phases has already started. we took it. as part of a capacity expansion programme. he said. we have used part of the sales proceeds. Shaw Wallace sales people and the procurement people. UB Engineering and UB Holdings to partly settle debt and for operations. which commenced in April 2006. But we had obviously reckoned that. the expansion would be funded by the recently concluded rights issue of Rs425 crore and the remaining through combination of internal accruals and debts. to pay a part of the debt. Shaw Wallace structure was fairly a complex structure.

Agrichem. UB group has following divisions: . Dunlop India Ltd." Important: Merger and acquisition of any company always interesting for people who are in business. Vidya Chhabria became chairperson of the group. It started its business with manufacturing of beer. Although this case is 4 years old but still have some importance. Ms. Gelatines. Freight Forwarding and Electronics. In 1987 it came under Jumbo Group.professional advisors to come up with the exact road map for the merger and we expect them to announce it within next 45 days. Vittal Mallya became first Indian Director of UB group in 1947. Mather & Platt. Engineering. South Africa and India. The group is a diversified group with business includes beverages. In 1983. Shaw Wallace Company Shaw Wallace is started in 1886 in Calcutta. Singapore. Every cases of this type helps us to understand the mechanism of amalgamation. Chhabria s daughter Komal Chhapria became executive director of Indian flagship of Shaw Wallace & Co (SWC). He handled the group with more professional management. United Kingdom. Group divested paint business in 1996. M R Chhabria. lead by Mr. Jumbo Group is an international business conglomerate based in the United Arab Emirates. Japan. Falcon Tyres. UB Group The UB (United Breweries) Group was founded by Thomas Leishman in 1915. Tanneries. Tyres. South Korea. become chairman of the group. Sri Lanka. In 1988. Chhabria in April 2002. Shaw Wallace was comprises of following divisions: y Liquor Division y Beer Division y Wine Division y International Business y Traditional Business After demise of Mr. group acquired Berger Paints. Hindustan Dorr-Oliver. The $2 billion Jumbo group s Indian operations include flagship Shaw Wallace Co Ltd. Gordon Woodroffe and New Video Ltd. M. Its business is established across Hong Kong. Vietnam. Russia. son of Vittal Mallya. Silence of government authority is also notable in the case. Vijay Mallya.R.

Antiquity Super. In October 2004. Company would try to enter Maharashtra. They started brand extension with White Mischief brand. increased 54% market share in last year to 65% last year in its segment. Shaw Wallace Breweries Limited (SWBL) was a joint venture between Shaw Wallace and South African Breweries was having market share of 36% in India. Prof Phillip Kotler was added as a long term investment and company was expending more on golf as a part of marketing. United Breweries Shotz. They already launched gin. High price seemed to be reason of less selling. 2004 that it was evaluating unsolicited offer strategic alliance with equity alliance. Bacardi s Breezer.y y y y y y y Beverage Alcohol Pharmaceuticals Media International Trading Fertilizer Research and Development Aviation How Merger Proceed Shaw Wallace controls 10% of the market of the country liquor in States where it operates. a premium whisky. Komal C Wazir. Shaw Wallace was doing brand extension and new product lunch in the premier segment only. In India. Company s beer sales share in country also increased from 33% in the previous year to 35% in the year 2003-2004. Karnataka and Rajasthan. in November 22. United Breweries was in the 1st place with 43% market share in the breweries market. Shaw Wallace was present only in Uttar Predesh. United Brewers informed BSE. UB already had Rs. Director s special. Shaw Wallace was aiming to become number one or two in every category over the next years. Ready to Drink (RTD) is not selling well in India. They said that they did not have any plan to lunch any new product in the regular segment. vodka. Balarampur Chini s Xotica. The entire product range belongs to Mischief line of brand. Haywards Fine etc were controlling 16% market share. It was expecting 17% y-o-y growth in the next year. France and also ramping up export in Australia. .3 lakh cases of RTD sold. 250 Crore investment from Scottish and Newcastle (S&N) couple of years back. Shaw Wallace s Vebe were hardly selling in the market. Its other brands like Antiquity. Shaw Wallace president Mr. brandy and Black Mischief rum. In 2003-2004 3. Cost of molasses was a concern for the company. Samsuddin announced that company was upgrading its machinery to improve manufacturing process. They also had a plan of launching new brand of malt whisky shortly. In 2004. Royal challenge. RTD was introduced in 2002. As per Ms. Shaw Wallace announced that they were eyeing on the export market Australia.

5% each in the UBL. 1200 Crore which is 120% premium over market capitalization of last 12 months. Under the terms of the deal S&N would have 17. Komal K.83 points. Mc Dowell & Co Ltd. Taking advantage to the shortage. 204. second hand bottlers increased price of bottle from Rs.05. Business volume of UB group was 35 million and SWC had 14. Later SWC changed it plan and invited bid for 55% stake in the holding company. 247 Crore through non convertible redeemable preference share. Mr. Vijay Mallya of UB group announced that he had entered into an agreement with Britain s largest brewer S&N for selling 37. 7. 2005. Wazir was only interested to run the company but others wanted to sell it. The injection rate is around 15% per annum. There was an inheritance problem in daughters of Late Manu Chhabria. Rest of the shares will be with the Indian Public and Indian Financial Institutions.50 to Rs. Vijay Mallya announced 25% open offer for Shaw Wallace Rs.5 cases volume. UB group was the highest bidder for sprit division of SWC which was put in the block. Shaw Wallace gains 10% and closes at Rs. Mr. Post deal UB and S&N both will have 37. chairperson of $2 billion Jumbo group was in the list of 50 most powerful women in business internationally in 2004. This deal would create more pressure on second company Shaw Wallace. 575/share). Phipson Distillery and United Sprits.300 Crore. After the acquisition UB group will become world s second largest breweries company with 49.5 million cases.In India only 60-65% bottles were returned to the company and rest of the bottles are injected by the companies. In November 2004. This offer valued Shaw Wallace Rs. 3. This is an 8. To break monopoly of bottlers UB group and SWBL came together because it was affecting bottom line of both the company. The UB group had bid Rs. British company will further infuse Rs. He also indicated a breakdown of talks between UB group and Ms. a flagship of the UB Group also increases 10% to Rs. Vidya Chhabria of Shaw Wallace Company (SWC). 217 Crore (Rs. Ms.153. 250. 1251 Crore. Manu Chhabria s widow Vidya Chhabria told McKinsey (based on Singapore) to search buyers for several Chhabria companies. Total cost of the open offer will be Rs. This price is equal to the price of new bottle. They would also come with the open offer of 20%. 2005 BSE SENSEX closes at 6.5% stake in the company. She was in the list for third time in succession. On February 10. On February 23. . Through the deal UB was expecting to capture more than 50% market of Indian Bear Market.15.577.2% premium over the last closed price. In December 2004. Mallya also said that none of his company has acquired any stake in Chhabria Group Company.5% stake in the flagship company UB Ltd for Rs. Earlier they had a so bitter relationship that there was undercutting to the extent of loss. Open offer of UB group is through group companies McDowell & Co. She ranked 38th place in the list and only Indian in the list. Vidya Chhabria.

share price of SWC had fallen 2. 1330 Crore ($300 m) for a stake of 54. 225. Share price of UB flagship Company McDowell & Co. The deal is evaluated as Rs 325 per share. Punch Fine. They appealed that they had given a short term loan of Rs. LIC chairman LN Bhardwaj told that they were considering the offer. They said the increase in the raw material cost is the reason for this discontinuation. Its Profitability has slipped since 2002 and operating income has also fallen dramatically. Earlier they hold the sell off of 55% stake of Chhabria family. Its revenue is stand still at Rs 100 Crore. the sprit company. In March 20.55. Later there was an out of court settlement of Rs 57 Crore. SWC announced that they are open to any fair price for selling off. Calcutta High Court passed a stay order on selling of SWC stock after a petition by three companies Visishth Chai Vyapar Pvt Ltd. Although Mr. 2005. Mallya clarified that he needs to come up with offer after the getting promoters share also. UB group also said than open . 2005. Now if ownership trademark and brand names are transferred then recovery of money will not be possible. All group companies of Jumbo Group including SWC has cross holding. Shaw Wallace said that they reworked their brand strategy and now the focus would be on improving the product mix and enhancing the value of existing brands.5% to Rs. Financial performance of Shaw Wallace had been slackening. High Command. If they opted for open offer to sell their entire stake then UB group will have mandatory 26% stake to move or block any special resolution. March 31. Shaw Wallace announced that it had dropped 6 brands. Corporate governance of SWC board needs to show that they are for all stock holders not only for promoters.172. had rose 10% to Rs. It was the time liquor and tobacco companies were making profit worldwide. MKJ Enterprises and MKJ Developers Ltd. Black Panther Rum and Kings Blend Brandy. 2005. Stopped brands are Malkajgiri Malt Whisky. SWC has 40% of the equity of Shaw Wallace Distilleries. and has a 50% stake in SAB Miller India which is a joint venture between South African Breweries and Shaw Wallace for bear business. Move of the financial institution would be vital in SWC. Shaw Wallace said they were considering legal option against the UB group bid but it is an open offer and legal options are limited. February 26. Gold Medal Brandy. It is clear that open offer of UB group is targeted part of institutional investor also.Share holding pattern of SWC is shown in Exhibit 2.54% share of SWC. Next day of the open offer announcement by UB group for SWC. 80 Crore to SWC in 1993-94. Vijay Mallya announced that UB group had closed the deal with Chhabria family owned Jumbo World Holdings Ltd (JHWL) for Rs.

UB group also in the process of Herbertsons Ltd. 300 Crore. Shaw Wallace Financial Services and Shaw Wallace Breweries limited merged. A huge gap between other player and the group is also a matter of concern. 12000 Crore for revenues. Other players like Radico Khaitan. It was declared in 59th AGM of Shaw Wallace in September 2005. Mallya said the every year SWC and UB spend Rs 200 Crore each for just fighting with each other. Industry estimate for valuation is Rs. India market capacity is 110 million cases of Indian Made Foreign Liquor (IMFL). Britain s Diageo Plc is in the first place and France s Pernod Ricard PA (after buying Britain s Allied Domecq) is in the second position. Majority control of Narmada Gelatine Ltd will be divested to Jumbo affiliate as soon as practicable to maintain Jumbo Management Team. after the out of court deal with Kishore Chhabria. Synergy in the merged entity y Increased bargain power with monopolistic customer (Government share of market is 65% and Private market share of about 16%) y Economics of scale of distribution system. UB-SWC deal qualified for both the counts. Regulatory and Legal Issues Competition Committee of India (CCI) might investigate any deal (involving two Indian companies) in which exceeds Rs. When two Indian companies involved the threshold limit is Rs 4000 Crore for assets and Rs. Mohan Meakins and Seagram having market share of 6-7 million cases.1000 Crore or where the combines asset exceeds Rs. There would be two companies United Breweries and SWC still FY 2006 and then they would be merged to United Sprit. It was also declared that . Realization of Intended Object UB Group becomes the third largest sprit company in the world. y Increased bargaining power with the suppliers like bottles y Organizational savings arising from consolidation through elimination of multiple offices and duplication of manpower y Reduced promotion spent and improved market realization Post Merger Situation In August 2006. more that 50%. How the Deal was financed The deal was financed by borrowing $300 million from ICICI bank win equal proportion of foreign and domestic currency. When asked about the over valuation of Rs1300 Crore for SWC Mr. This will now be added to the bottom line.e.260 per share. Post open offer UB group has 75% share. the make of Bagpiper whisky. UB and SWC will have together 55 million case capacity i.312 Crore for acquisition of 25% share through open offer.offer price has been revised to Rs. This also excludes bear joint venture of SWC. Mallya also clarified that he was only interested in sprit business and no other business. 80 Crore for a million cases. UB group has paid Rs 1545 Crore including Rs.

Details are given in Exhibit 8 y Stock Price of Shaw Wallace was below Rs. Details are given in Exhibit 5. which is only 7. McDowell announced that following eight companies were amalgamated into one entity of McDowell India Sprits Ltd and later named as United Sprit Ltd. y Operating profit margin. 464 Crore. 250 before Jan 2005 but it was more than Rs 250 at after June 2007. Shaw Wallace Distilleries Ltd 6.44 Crore.e. Details are given in Exhibit 7 y Dividend percentage also increased. McDowell International Brands Ltd. y Net profit also increased from Rs. A study by Assocham said that Shaw Wallace was in the 10food and beverages company in terms of market capitalization.02 in 2003-2004 to 6.0. United Distillers India Ltd 8. Rs. It occupied last slot in terms of market capitalization in 20032004. Details are given in Exhibit 4. 1. . This had cleared the barrier of legal merger of Shaw Wallace into UB Group. y Net Cash flow from operating activity also increases.14 in 2007-2008. United Spirits Ltd 3. Long standing legal battle of Shaw Wallace ended on October 1. Merger has created a large amount of share holder s value for Shaw Wallace Company. Gains to shareholder of target and acquirer Gains of Target (Shaw Wallace Company) y EPS has increased significantly from 0. Shaw Wallace shareholder got four share of United Sprit for every 17 share they hold.48 Crore in 20072008. Gross profit margin and Net profit increased significantly.5% of the original demand i. Phipson Distillery Ltd 2. Baramati Grape Industries Ltd 7.09 Crore in 2003-2004 to Rs. Triumph Distillers and Vintners Pvt Ltd 5. Herbertsons Ltd 4. 2007. Shaw Wallace passed board approved merging of the company with United Sprit Ltd. It had given 261 percent return in 2004-2005 against 123 percentage return in 2003-2004. Details are given in Exhibit 5. 29.combined entry had 130 brands out of which 35 brand fetch 90% of the profit. It had been settled for mere Rs 34.

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