MUMBAI: United Spirits Ltd on Monday announced the merger of Tamil Nadu-based Balaji Distilleries Ltd with itself, in an all-stock deal. The merger is effective April 1, 2009. The swap ratio fixed by the company is 2:55, i.e. every two shares of United Spirits for 55 shares held in Balaji Distilleries.

Balaji Distilleries has been a contract manufacturing unit for UB group ever since its inception in 1983 with a distillery capacity of producing 10 million cases per annum and brewing capacity of 9 million dozens per annum. It accounts for 60 per cent the company’s beer volumes in the state where United Spirits is a market leader with 59 per cent market share in the state’s beer market.

Commenting on the merger, Mr. Vijay Mallya, chairman of the UB group, said the merger would de-risk the company’s earnings and help it consolidate its leadership position in large and growing market. Tamil Nadu accounts for 15 per cent of the company’s domestic revenues and ranks fifth in terms of contribution to the company’s profits. It is the only state where the company did not have its own production facility due to regulatory constraints.

After reacting strongly to the announcement in the initial hour of trade, United Spirit, which was up by 3.3 per cent has given up some gains and is now up 1.3 per cent at Rs 857 on BSE, at 11:13 am.

source: Economictimes

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