Serial entrepreneur Ramesh Vangal, who steered Pepsi and Seagram into India, is back in the M&A ring. He has initiated discussions with Radico Khaitan (RKL) to acquire a controlling interest in the brands portfolio of the Lalit Khaitan family-owned liquor firm.
Banking sources said Mr Vangal is backed by a large American buyout fund in his latest efforts to chase deals in the liquordom. Bermuda-based white spirits giant Bacardi is another potential suitor which has held talks with the Khaitans in the recent past.
Investment bankers have been working on behalf of RKL — facing a liquidity crunch — to explore strategic options, including a 26% stake sale in the parent company, or offering up to a 51% stake in an hived-off entity, holding brands like 8PM Whisky, Magic Moments Vodka and Contessa Rum.
Suitors like Ramesh Vangal and Bacardi are keen on acquiring the branded assets, and not the legacy business of bulk spirit manufacturing and country liquor, sources added. Mr Vangal is believed to have indicated an offer price of around Rs 300 crore for getting a controlling interest over the brands even though the figure could not be confirmed. One source said the price indicated was below the expectations of the Khaitans.
Abhishek Khaitan, MD, Radico Khaitan, said the company was not exploring any assets sale at present. “We are looking at a 25% growth this year and looking forward to introducing more premium brands,” he said. But the company could look at a strategic partner at a later date depending on the sectoral consolidation that is anticipated, he added. An email questionnaire to RKL remained unanswered.
When contacted, Ramesh Vangal-led Katra Group said it’s looking at opportunities of acquiring brands and to be a volume player in the alcoholic beverage space, but refused to be drawn on specific queries pertaining to Radico Khaitan.
Sources close to Bacardi said tentative discussions with Radico have not made any substantial progress.
Last year, Radico Khaitan, which sells over 13 million cases annually, parked some of its brands in a separate trust for raising working capital from YES Bank. Sources said the company may have raised another debt facility from the bank, prompting it to go slow on assets divestment plans.
Mr Vangal is returning to M&A in the alcoholic beverage sector after losing a closely-fought bidding war for Shaw Wallace & Co, which was eventually snapped up by UB chairman Vijay Mallya in 2005. At present, he has a limited presence in the spirits business through Bangalore-based firm Mason & Summers with Glen Drummond Single Malt as its brand.
Mason & Summers also has a distribution tie-up with Mohan Meakin, makers of Old Monk Rum, in some markets. Vijay Mallya-led United Spirits dominates India’s liquor industry with over a 55% market share leaving the home-grown rivals in a challenging environment. Mr Vangal, who through Seagram was involved in setting up a successful MNC spirits company in India, is attempting the role of an aggregator in a highly-regulated sector.
But in doing so, he could run into MNC rivals like Pernod Ricard and Bacardi which are also chasing buyout opportunities in a market often described as the growth sweet spot for the global drinks industry.
Source: Economic Times