Companies & Sectors
UK fair trade regulator express concern over Diageo-United Spirits deal

Despite Diageo offering to divest bulk of Whyte & Mackay business to address anti-competition concerns posed by its deal with United Spirits, the UK OFT expressed concern about the impact of the deal

The Office of Fair Trading (OFT) in the UK has released a 53-page report detailing concerns posed by the Diageo-United Spirits deal to competition in the British whisky market.


On 25 November 2013, the OFT decided to have a fresh look at the $2 billion deal, after Diageo offered to divest bulk of Whyte & Mackay (W&M) business to address anti-competition concerns posed by this merger.


The regulator on Thursday made public the “full text” of its 25th November decision, wherein it said that “the OFT is concerned only by the impact of the transaction“.


“The focus of the competitive assessment is therefore on the incremental effect on competition of Diageo’s shareholding and the control this confers on Diageo.


“... A significant number of third parties raised the concern that the parties would restrict the supply and/or increase prices of private label blended Scotch whisky,” the 53-page order said.


The OFT had received comments from a wide range of customers and competitors of Diageo and W&M and their views have been incorporated appropriately in its decision.


The regulator said that it “found that the merger gives rise to a realistic prospect of a substantial lessening of competition” and subsequently the merged parties offered an undertaking “to divest the entirety of the W&M business apart from two malt distilleries and the associated brands of those two distilleries”.


Diageo manufactures and supplies spirits, wine and beer in the UK and around the world. It owns a number of spirits brands both worldwide and in the UK, including Smirnoff vodka, Bell’s and Johnnie Walker Scotch whisky, Baileys liqueur, Tanqueray gin and Captain Morgan rum.


On the other hand, India-based United Spirits, part of Vijay Mallya-led UB Group, manufactures and supplies spirits in the UK and in other countries. All of its sales of products in the UK are made through its UK subsidiary W&M.


United Spirits had acquired W&M for about £595 million (then nearly Rs5,000 crore) in 2007.


In July 2013, Diageo completed acquisition of a 25.02% interest in United Spirits, while it has now raised its stake to close to 30 per cent.


While the deal has been cleared by various regulators, including Competition Commission of India (CCI), OFT ruled in November last that the merger may substantially lessen competition in the supply of blended whisky to retailers.


OFT came to this conclusion after analysing evidence including data on consumer switching between brands, economic modelling and internal documents.


“Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers,” OFT had said earlier.


SEBI chief UK Sinha gets 2-year extension

UK Sinha, a 1976-batch IAS officer, had served as joint secretary in the Finance Ministry and joined SEBI after serving as the CMD of UTI AMC

UK Sinha, the chairman of Securities and Exchange Board of India (SEBI) on Friday got a two-year extension till 2016.


The Finance Ministry has issued a notification to this effect. “The notification for SEBI Chairman’s extension has been sent to SEBI late last night,” a senior Finance Ministry official said.


The extension will be with effect from 18 February 2014 till 2016.


Sinha’s three predecessors — CB Bhave, M Damodaran and GN Bajpai — had a three-year term. Only DR Mehta had served as SEBI chairman for the longest duration from 1995 to 2002.


Sinha, a 1976-batch IAS officer, had served as Joint Secretary in the Finance Ministry and joined SEBI after serving as the Chairman and MD of UTI AMC.


Foseco India declares final dividend of Rs15.5 as Q4 net profit falls 47%

Foseco India declared a final dividend of Rs15.50, taking its full year dividend to Rs24.50 per share even as its December quarter net profit fell 47%

Foseco India, a supplier of metallurgical chemicals for the ferrous and non-ferrous industry, reported 47% fall in its fourth quarter net profit due to subdued demands and lower margins.

For the quarter to end-December, Pune-based Foseco India said its net profit fell to Rs2.16 crore from Rs4.04 crore, while, its total revenues, including sales, declined 3% to Rs56.26 crore from Rs57.81 crore, a year ago period.

During the quarter, the company reported a 2% increase in its expenditure at Rs53.24 crore from Rs52.40 crore a year ago period.

However, as on 31 December 2013, Foseco India’s reserves and surplus stood at Rs94.16 crore, a 13% increase than a year ago period.

Foseco India announced a cumulative dividend of Rs24.50 per share including final dividend of Rs15.50 and an interim dividend of Rs9 per share.

Foseco India closed Friday marginally down at Rs497 on the BSE, while the 30-share benchmark ended the day flat at 20,387.

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