Acquisition : Leveraging opportunities in India and emerging markets. Investor Presentation. May, 2007

Transcription

1 Whyte & Mackay Acquisition : Leveraging opportunities in India and emerging markets Investor Presentation May, 2007

2 Key growth opportunity consistent with existing strategy Acquisition of a leading Scotch Whisky Asset which provides control of heritage brands, scotch whisky inventory and manufacturing base Provides strong platform to fully exploit the rapidly growing India opportunity for Scotch Whisky, esp. at the premium end Provides strong brands to tap other high growth emerging markets; esp. China and Russia Secures long term critical Raw Material requirements for USL s Premium brands Significant incremental value under USL ownership India advantage; Brand building; rub-off on rest of USL portfolio Consistent with existing strategy to create value in India and other markets 2

3 Agenda Scotch Whisky Industry Background Whyte & Mackay Acquisition Rationale Transaction summary Conclusions 3

4 Global scotch whisky industry is expected to be extremely buoyant in coming years Strong growth expected on the back of rapid demand growth in China, India and other developing markets Strong upswing in pricing as production considerably lags demand growth Scotch market growth rates in developing countries (2005/2004) % Increase in prices of bulk whisky since Aug 2006 % 140% 120% 100% 80% 60% 115% 10% overall volume growth in 12 months ending February % 120% 100% 80% 60% 4 yrs 12 yrs 4 yrs 12 yrs 40% 20% 30% 17% 12% 26% 40% 20% 0% China East Europe APAC Latin America India 0% Grain Malt Source: Scotch Whisky Notebook,

5 Buoyancy is evident from the recent results of major scotch whisky players Extracts from recent investor presentations of. Diageo (Six month ended Dec 31, 2006) Pernod Ricard (Nine month ended Mar 31, 2007) Volume Growth % Net sales growth % Scotch 7 11 Vodka 5 6 Gin 1 2 Liqueurs 3 6 Rum 4 8 Tequila 7 8 NA Whiskey Total Spirits Vol. growth % Net sales growth % Premium Standard 4 4 Value (8) (5) Total % growth in India 70% growth in China Chivas Regal : Volume +6% Sales +7% Q3 growth : 22% Ballantine s : Volume +23% Sales +28% Q3 growth : 25% The Glenlivet : Volume +13% Sales +15% Strong growth in China and Asia 5

6 In the Indian market, Scotch whisky has a significant latent demand Consumers are trading-up to premium products due to rapidly changing demographics In the past, scotch segment has not achieved a critical mass because of lack of distribution and infrastructural support to incumbent scotch brands Latent demand for Scotch whisky can be captured through comprehensive distribution of the scotch whisky across the country Indian Market growth in Superpremium Widespread availability of the product can significantly increase product demand Super-premium 50-60% Premium Premium 25-30% Prestige Prestige 25-30% Regular Regular 10-15% Medium & Cheap Medium & Cheap Current 6 Future

7 Agenda Scotch Whisky Industry Background Whyte & Mackay Acquisition Rationale Transaction summary Conclusions 7

8 Whyte &Mackay is a strategic asset in the scotch whisky industry Founded in 1844, Whyte & Mackay possesses rich heritage in Scotch Whisky business 4th largest scotch whisky player in the world Worldwide presence in all key markets; Strong pan-european presence 30 Million case and case equivalents 20 World s largest Scotch Whisky Companies 10 0 Diageo Pernod Ricard William Grant Whyte & Mackay John Dewar & Sons Edrington Group 8

9 Whyte & Mackay has distilleries in all key scotch whisky regions which provide unique heritage to its products In a supply shortage situation, W&M owns strategic manufacturing assets Scotch Whisky Regions Amongst the largest independent distillers of Scotch Whisky Controls significant proportion of non-captive grain whisky supply : 20%+ of non-captive supply Controls strategic inventory of aged malt and grain whisky : 115m ola Dalmore Invergordon Tamnavulin Fettercairn Inventory at current broking prices is valued at 380m Jura Control over strategic scotch whisky stocks and production facilities provides ability to source material at competitive rates 9

10 Whyte & Mackay has strong heritage brands across the entire spectrum Luxury Ultra luxury 30 to 60 year old Malts The Dalmore Whyte & Mackay (13 yrs and above) Whyte & Mackay Original 40 years old The Isle of Jura 40 Dalmore 1973 Isle of Jura Glayva Mainstream Fettercairn Whyte & Mackay Special Vladivar Stewarts Mackinlay Tamnavulin Value Gleniffer Claymore John Barr Cluny Findlaters Crawfords 3 star The Real Mackenzie Highland Pride 10

11 Blended Scotch Whyte and Mackay Whyte & Mackay is a leading scotch brand in Scotland, the home of Scotch 5 th largest scotch whisky brand in UK Whyte & Mackay is a stylishly masculine brand with a real Glasgow based heritage Unique double marriage process Renewed marketing thrust and repackaging has put the brand on a strong growth path Recent Nielsen retail audit studies show a strong upward trajectory Whyte & Mackay Value % Change Total GB Key Blends Growth - Value Performance EW Off Trade Total EW GB Grocers EW Grocers Nielsen MAT to FEB W&M Grants Teachers Bells Nielsen MAT to FEB 07

12 Single Malts - Isle of Jura The brand comes from the only distillery in Jura which provides it a unique heritage Jura is steeped in history, a magical island with palm trees, not wet hills, off the coast of Scotland formerly the playground of the aristocracy Jura is a lifestyle luxury brand Targeted at people looking for genuine, down-toearth luxury giving them a taste of island On-Trade growth in Great Britain Isle of Jura has been the fastest growing top Malt in GB On trade over the last 2 year Similarly, in off-trade brand grew by 15% JURA HIGHLAND PARK TALISKER Nielsen MAT JAN 07 LAPHROAIG MACALLAN GLENMORANGIE

13 Single Malts The Dalmore A true luxury goods brand built on connoisseurship and understated elegance A bottle of The Dalmore 64 yr aged product was sold for 50,000 making it the most expensive single malt in the world Distributed by Jim Beam in USA The range includes a 12yo, The Cigar Malt, The Finesse, 15yo, 18yo, 21yo, 25yo, 30yo, 40yo, 50yo, 60yo and 65yo 13

14 Vodka - Vladivar Amongst top 5 vodka brands in UK 100% pure grain vodka distilled in Scotland and belonging to high quality vodka category. Won Best consumer campaign award by Drinks Business Brand re-launched to target the young & hip 14

15 What is being acquired? Strong international heritage brands Blended Whiskies Whyte & Mackay, Mackinlays, Claymore, John Barr Single Malts Isle of Jura, Dalmore, Fettercairn, Tamnavulin Others Vladivar, Glayva Control over strategic scotch whisky assets 4 th largest scotch whisky player Owns Invergordon distillery in addition to four Malt distilleries Capacity of 40 million litres (Grain) and 12 million litres (Malt) Scarce aged scotch whisky stock Inventory at current broking prices is valued at ~ 380million Provides control over scotch whisky stocks equivalent to million cases Strong Distribution set-up Presence in large number of western countries across UK, Europe, USA Business with reasonable scale Annual sales of 160 million 15

16 Agenda Scotch Whisky Industry Background Whyte & Mackay Acquisition Rationale Transaction summary Conclusions 16

17 USL + W & M are best positioned to exploit the opportunity in Indian market Critical success factors Global Competitors in India USL Favorable Unfavorable USL W & M Ownership of premium scotch whisky brands Access to scotch assets Distribution strength Manufacturing set up Portfolio strength Understanding of Indian consumers Latent demand for premium spirits in India can be realized by combining strengths of two companies 17

18 Significant opportunity to expand international business in emerging markets Global Buoyancy Strong increase in demand on back of growth in China and other developing markets Strong upswing in pricing as production considerably lags demand growth + W&M/USL strengths International heritage brands; Brands have been recently repositioned/ repackaged and have demonstrated strong growth potential In a supply shortage situation, W&M owns strategic manufacturing assets USL has strategic relationships with leading companies in several emerging markets (e.g. Russia, China) Significant potential to increase sales of W&M brands in international markets 18

19 Acquisition would significantly alter USL size, increase its profitability and position it as a global player Increases scale by 33% Increases EBITDA by 80% International market would account for 25% of sales Margin expansion of 5% Sales pre and post acquisition EBIDTA pre and post acquisition million Pre Post 19 Note : Based on USL s imputed value of sales; USL financials are actuals 0 Pre Post

20 Agenda Scotch Whisky Industry Background Whyte & Mackay Acquisition Rationale Transaction summary Conclusions 20

21 Transaction is EPS accretive in Year-1 Transaction: 100% acquisition of Whyte & Mackay Group Ltd by USL Offer Price: Enterprise Value ~ 595 mn Funding: 325 m of debt on strength of target assets with no recourse to USL Balance debt in overseas SPV of USL Accretion Analysis EBIDTA% increase in Year 1 EPS accretive in Year 1* Divestment of minority stake in target and sale of treasury stocks of USL would help revert to current debt/equity in year 3 while retaining management control 21 * Pre one-time costs of acquisition and restructuring

22 Transaction compares favourably with other precedent scotch whisky transactions Comparable Scotch Whisky transactions EV/EBIDTA Edrington Group/William Grant/Highland Distiller CL Financial/Burn Stewart plc Moet Hennessy/Glemorangie Diageo/Bushmills USL/W&M 22 * Multiple is EV/CAAP as opposed to EV/EBIDTA *

23 Agenda Scotch Whisky Industry Background Whyte & Mackay Acquisition Rationale Transaction summary Conclusions 23

24 Summary Strong business rationale Transaction compares favourably as compared to global transactions Transforms USL size, scale & profitability Significant value upside 24

25 Questions