ABD calls off Tilaknagar Industries' acquisition due to differences over valuation

MUMBAI: Kishore Chhabria-led Allied Blenders & Distillers ( ABD) has called off talks to acquire Tilaknagar Industries because of differences over valuation, a top executive said.

“There was a significant difference in what we were offering and what they were expecting,” said Deepak Roy, executive vice-chairman of ABD, which makes the top selling liquor brand in the world, Officer’s Choice.

The deal was to acquire a majority stake in Tilaknagar, the maker of Mansion House brandy and Savoy Club gin, for an enterprise value of about Rs 1,500 crore and end the production and distribution fight over the two brands. With sales of nearly 5 million cases, Mansion House is the No. 2 domestic brandy and the mainstay of BSE-listed Tilaknagar, which is in the midst of a Rs 550-crore debt restructuring. Tilaknagar refused to comment citing regulatory reasons.

However, an executive who was part of the deal talks, said there were no differences over valuation, which he said was arrived at after due deliberations last month.


"In fact, both legal representatives had been working to finalise the finer nuances of the deal," said this executive. Last month, there were reports that ABD was close to buying a 51% stake of Tilaknagar from its owner Dahanukar family. The plan was to then make an open offer for another 25%, the reports had said.

Tilaknagar, which entered into a pact with Herman Jensen (formerly UTO) 30 years ago, had claimed the latter ceded the rights of Mansion House brandy to rescue itself from a court action in Rotterdam in 1987. Under this arrangement, Jensen would retain the Mansion House brand in whisky, which was a bigger business then. The Dutch side, however, argued that the arrangement was never legally solemnised and moved courts in 2008, by which time Mansion House brandy had emerged as a formidable brand in the Indian market.

In December 2011, a one-member bench of the Bombay HC held that Tilaknagar had the rights to Mansion House in India, but Herman Jensen went on to appeal before a division bench. Last year, ABD bought a 50% stake in the Mansion House brandy and Savoy Club gin brands from Herman Jansen.

ABD already has a winner in its flagship Officer’s Choice, which sold 28.4 million cases in 2014, knocking Smirnoff vodka off its perch as the world's largest spirits brand by volume.

ABD has been on an acquisition drive over the past two years, buying Telangana-based grain spirit distillery Shasta Bio Fuels for about Rs 200 crore and Wales Distillers in West Bengal and Unakoti Distillers in Tripura. In 2014-15, ABD grew 29% by selling 32 million cases, despite the overall market for Indian-made foreign liquor slowing to 3%. However, the company has limited exposure in the brandy market, the second largest liquor category contributing 25% to the IMFL industry and is among the fastest growing category in the past few years.