GLENMORANGIE FOR SALE

Published: 23 July, 2008

By Ron Emler

Glenmorangie, the only remaining independent producer of Scotch quoted on the London Stock Exchange, has been put up for sale. The Macdonald family, which collectively controls some 52% of the voting rights, has decided to sell its stake, thus triggering a full auction of the company. The Macdonalds informed the board of their decision several weeks ago, but news of the sale was only made public towards the end of August, following a sudden 26% surge in the share price to 13.30, which values the company at about 240 million. Apart from the eponymous flagship brand, which holds about 17% of the UK market for single malts, Glenmorangie also produces the Glen Moray and Ardbeg brands. Collectively, they account for about 90% of its pre-tax profits, which totalled 9.57 million in the year to 31 March. The company sells about 2 million cases of whisky a year. In addition, it holds a lucrative bottling contract for Drambuie, and bought the Scotch Malt Whisky Society for 2.4 million last Christmas. City analysts believe that the company could attract a price of about 300 million because of its rapidly expanding market, which has been boosted in recent years by distribution agreements with Brown-Forman in the US and Bacardi in western Europe. However, there is also speculation that the value of Glenmorangie's maturing stocks could push that price even higher, because although they are only valued at cost in the latest accounts, it is suggested that they are insured for about 400 million. Brown-Forman holds 10% of the voting rights in Glenmorangie and has a seat on its board, leading commentators to speculate that it is in poll position in the auction. Similarly, Bacardi would welcome a range of premium single malts to add to its portfolio. While none of the multinational drinks groups has formally ruled out making an offer, it is widely believed that Diageo would face considerable regulatory hurdles in both Europe and the US because of its dominant position in the Scotch market. Similarly, Pernod Ricard, which has made considerable progress with The Glenlivet since buying it as part of the Seagram split three years ago, may be excluded on similar grounds. A venture capital buyer is unlikely because of the extra cost-savings that could be achieved by a group with a large international spirits portfolio.

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