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Mallya, Apollo in UK takeover talks

india Updated: Feb 20, 2007 12:42 IST

After Tata Steel acquired Corus in January, the next mega deals involving Indian companies are expected to be Vijay Mallya's United Breweries taking over whisky major Whyte & Mackay and Apollo Hospitals buying out a string of private hospitals in Britain.

After several months of negotiations, Mallya has reportedly agreed to raise his price for Whyte & Mackay to 550 million pounds. His initial offer was said to be 475 million pounds while the current owner of the Scotland-based company had valued it at 600 million pounds.

Reports in London say that a final deal is "still subject to a process of due diligence", but sources close to Mallya are quoted as saying that the deal could be wrapped up within as little as a fortnight. Neither of the two companies has formally announced any move on this subject so far.

Whyte & Mackay brands include W&M Scotch whisky, Vladivar vodka and Jura single-malt whisky. According to the Daily Telegraph, the company has a 9 per cent share of the global Scotch market.

Last week Mallya told Scotland On Sunday: "Negotiations on Whyte & Mackay continue in a positive sense. Progress is being made and the gap between previous positions of both parties is narrowing."

A deal worth 550 million pounds would be a windfall for Whyte & Mackay's shareholders, including chairman Vivian Immerman and his brother-in-law, Robert Tchenguiz. The two had bought the company along with other investors in 2001 for 208 million pounds.

The expected deal with Mallya's United Breweries needs to be seen in the context of the long-drawn battle of wits and power between Mallya and the Scotch Whisky Association (SWA), which has campaigned vigorously at various levels in Britain, the European Union and India to ensure that India reduced its import duties on imported spirits in line with WTO (World Trade Organisation) regulations.

There is considerable interest in the Indian market due to its growing middle class and exponentially increasing demand for Scotch whisky. Industry leaders are keenly awaiting India's forthcoming federal budget for announcements of reduction in import duties.

Also on the takeover path is the Apollo Hospitals Group, which is reported to be stalking a string of private hospitals as potential takeover targets. It is said to be in talks with potential co-investors to drive its international expansion plans.

According to the Daily Telegraph, Britain had become particularly attractive to Apollo's founder and chairman, Prathap Reddy, because of a surge of transactions that have seen Britain's private healthcare industry rapidly consolidate into private equity-backed portfolios.

The newspaper reported: "People with knowledge of Apollo's plans said the company had already expressed an interest in the operating arm of Capio UK, one of Britain's biggest hospital operators. Capio's business in Britain, which consists of 21 hospitals across the country, is part of a much larger European group of the same name.

"Dr Reddy's interest in Britain is unsurprising. Despite the political sensitivities of the industry, private healthcare has been among the most persistent targets of private equity deals in the UK during the past five years as buyout firms have unlocked hidden value in real estate portfolios and introduced tight cost controls by merging rival operators".

Meanwhile, one of Scotland's oldest manufacturing companies, Weir Pumps, is being sold to the Swiss company Sulzer for 48 million pounds and much of the work is to be farmed out to the new owner's plants in India and China. The buyout is expected to result in several job losses in the company founded in 1871.

Mark Selway, chief executive of Weir Group, told reporters that Sulzer already had a presence in India and China and were better placed to compete with other manufacturers with bases in low-cost countries.

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