United Spirits (USL) is buying 54.7% stake in Pioneer Distillers (PDL) at Rs101 per share (c.40% premium over last day’s closing price) for a consideration of Rs740mn (~$15.7mn). USL will make an open offer to acquire an additional 20% stake in PDL.
PDL operates 160KL per day (KLPD) spirit facility in key sugar producing state of Maharashtra; 100KL is molasses based facility and the rest uses grain as feed stock. With this acquisition, USL’s in-house primary distillation capacity is now c.22.5% of its total requirements.
The acquisition reinforces USL’s strategy of back-end integration to ensure steady supply of ENA through availability of internally sourced ENA. The strategy also enables USL to capture the pricing differential in externally sourced ENA. It had acquired Tern Distillers with capacity of 40KLPD in Nov’09 as a part of this strategy. PDL’s distillery is located in the sugar belt of the country; proximity to key raw material producing areas is an added advantage.
