Corporate Finance - Whisky deal sets record
Famous whisky brands have been bought in Scotland's largest ever management buyout
The glasses were being raised at KPMG Corporate Finance last week after pulling off the #208m Kyndal whisky brands deal – the largest-ever management buyout in Scotland.
Kyndal’s management, led by whisky veteran Brian Megson, bought the brands – including Whyte & Mackay and Invergordon – of US consumer group Fortune Brands, marking the end of Fortune’s experiment with scotch whisky during the 1990s.
The deal featured an innovative funding package, provided by the German bank WestLB (currently putting together an audacious bid for Railtrack) based on the long-term value and potential of the business. It involved a move away from traditional financing routes, and instead used asset-based financing.
As Trevor Bush, a senior director at KPMG, said: ‘When we talked to the management, we looked at the classic ways of buying out such a business – forming a joint venture or getting a venture capitalist or private equity house to put in some equity and leveraging the debt. But it became clear that the best deal would be to find a principal finance house, a bank that was prepared to buy the business and finance it with debt.’
The business, formerly a subsidiary of Jim Beam Brands, another part of Fortune, has a 9% share of the worldwide scotch whisky market, and turned over 7.4 million cases of spirits last year.
Such a strong cashflow lent itself to such a deal.
Megson, who has been with Whyte & Mackay for more than 20 years, was excited about the opportunity the MBO will give the company.
‘As the market consolidates and retailers pursue a global expansion strategy, the company now has the opportunity to further expand its significant business within the whisky industry,’ he said. ‘Kyndal is very much a new beginning for a company with a great heritage and a great team of people,’ he added.
Megson, as chairman and chief executive of the new company, will be joined by four directors, including finance director Ron MacEachran, formerly from KPMG himself, and a further four managers.
Collectively the team will own 25% of the equity.
As well as the Whyte & Mackay and Invergordon Distillers brands, the company will take over a number of other brands, including Vladivar Vodka, Dalmore Single Highland malt and Isle of Jura Single malt, though more than half of its revenues are generated from own-label scotch.
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It will also own five malt distilleries, the Invergordon grain distillery and facilities in Grangemouth and Leith.
The company currently employs around 260 staff, though there are plans to make a small number of redundancies.
More on the whisky industry www.accountancyage.com/Business/1125886.