This distillery has a capacity to produce 2-3 million litre of high-end malt whiskies per year, such as the Tamnavulin 12 and 25 year olds.
BANGALORE: One of the first thing that liquor baron Vijay Mallya would be doing after acquiring Whyte & Mackay (W&M) is reviving its the closed Tamnavulin distillery located in the Speyside region of Scotland, renowned for its peaty, smoky malts.
Mallya said production will begin by July 1.
This distillery has a capacity to produce 2-3 million litre of high-end malt whiskies per year, such as the Tamnavulin 12 and 25 year olds.
Set up in 1966, Tamnavulin is the only distillery standing on the river Livet - which has lend its name many brands (such as the Glenlivet).
Production had to be shut down in the area due to a downturn in the industry.
Tamnavulin is part of many blends, including the Mackinlay blends.
“The whisky that Tamnavulin makes is really valuable. That is the reason why Mallya is so keen on making it operational once more,” said a company official.
And any addition in capacity is only going be work in favour Mallya in a market situation where the Scotch whisky segment demand is growing at a very fast pace while supply is restricted.
Expansion of cities in the UK to traditional distillery areas have led to closures due to environmental risk for the new settlers. This, along with limited space for brownfield expansion, is reducing Scotch supplies.
Also, it takes minimum five years for a distillery to start from scratch and produce a saleable product.
All of which has led to scotch prices rising by 80% this year.
A capacity expansion will thus work in favour of Whyte & Mackay’s financials.
“United Spirits has been able to acquire W&M at an EBIDTA cheaper than its own valuation and at almost 20% discount to the global peer group average,” Citigroup analysts Princy Singh and Pragati Khadse point out.
This has led to the broking house estimating that the deal will be 15% accretive to United Spirits’s earning per share from first year, against an earlier estimate of 18% dilution.
And even though the deal will push the debt level of the company, Singh and Khadse believe it will be serviceable because of Whyte & Mackay’s EBIDTA of £50 million for this year.
Mahesh Nandurkar of CLSA Asia Pacific Markets said the consolidated EPS for 2007-08 will be lower than the standalone EPS as it will get pulled down by depreciation charge and other exceptional costs (deal and restructuring).
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