Heineken JV to merge with UB

Vijay Mallya’s UB group will buy a 54.99 per cent stake in Pioneer Distilleries and merge its breweries,including a venture with Heineken NV,with United Breweries Ltd,the owner of the biggest beer brand in the country,as the first step in the creation of fully integrated brewing entity. Mallya-promoted United Breweries will merge its group firm Millennium Alcobev,a joint venture between UB and Heineken,with itself. “The company’s board of directors has approved the merger of Millennium Alcobev and its subsidiaries with itself,” United Breweries said in a filing to the Bombay Stock Exchange.

“The combined entity will create significant value for all the shareholders and will help in optimising revenue,cost and capital synergies,” UB group chairman Vijay Mallya said. Millennium Alcobev has three operating companies with breweries located in Haryana,Maharashtra,Andhra Pradesh and Tamil Nadu. These breweries have annual capacity of 33 million cases. The board also approved the swap ratio for the proposed merger. As per the swap ratio,UBL will issue 15.01 crore new shares upon the merger of the transferor companies. The board also approved creation of UBL Benefit Trust which shall hold 60.10 lakh shares out of the newly issued UBL shares for the benefit of the company. “The UBL Benefit Trust would provide for an alternative fund raising mechanism for UBL on future sale of shares held by the Trust,” the company said.

Last year,Heineken and UB group had announced the merger of Millennium Alcobev with UB group following an agreement signed between them to jointly do business in the country. As per the agreement,Heineken will make APB India a wholly-owned subsidiary by paying 25 million euros to its JV partner. The Dutch company was to transfer this asset,which has a brewery each in Maharashtra and Andhra Pradesh,to UB in 2010.

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The merger will be effective April 1,2010,subject to the requisite approvals from the relevant statutory authorities and stakeholders,UBL said. “That the integration of brewery assets will further strengthen the relationship between Heineken and the UB group,which have significant growth plans for the coming years,” Mallya said. In addition to manufacturing UBL’s brands on contract brewing arrangements,Millennium Alcobev and its subsidiaries also own brands — Sand Piper and Zingaro — now marketed by UBL. Shares of UBL closed at Rs 437.80 on the BSE,up 1.04 per cent from its previous close.

In another move,Mallya controlled United Spirits,the country’s largest liquor maker,has proposed to acquire a controlling stake in Pioneer Distilleries for Rs 73.95 crore.