DIAGEO chief executive Paul Walsh has played down concerns that its purchase of a stake of up to 53.4% in Whyte & Mackay whisky owner United Spirits will cause the spirits giant competition problems.
The London-headquartered owner of Johnnie Walker whisky confirmed yesterday it is paying up to £1.3 billion for the holding in a deal that will reduce the financial pressure on United Spirits owner Vijay Mallya.
Glasgow-based Whyte & Mackay, which also owns the Jura and Dalmore single malt brands, has four distilleries.
Diageo, the world's largest spirits company, owns 29 distilleries, out of the 107 licensed in Scotland.
Mr Walsh indicated that he thought it unlikely competition authorities would force a sale of Whyte & Mackay, which can trace its roots back to 1844.
However, he said: "We need to look at it closely. I do not believe it is an automatic sale."
He also played down the likelihood that Diageo would have to sell any of its own whisky brands, which include Bell's and White Horse.
He said: "I would be surprised if our portfolio is impacted at all in this regard."
A Whyte & Mackay spokeswoman said it was business as usual at the firm.
Diageo will initially acquire a 27.4% stake from the founders of United Spirits, and subscribe to new shares to be issued by the firm.
Diageo will then launch a mandatory tender offer for another 26% from public shareholders at the same price, potentially giving it a majority stake.
It could be months until it is known whether Diageo will have to sell some of its whisky interests.
The deal first needs to be signed off by the Securities and Exchange Board of India and the Competition Commission of India.
Then, once the tender offer completes, it potentially requires clearance from the Competition Commission in the UK and the European Commission.
They could examine whether the added might of Whyte and Mackay gives Diageo too great a hold on supplies of Scotch whisky.
Andrew Walker, Edinburgh-based partner of law firm HBJ Gateley, said: "To the extent there are issues in the EU and UK markets for spirits or whisky, whatever it may be, they will look at it."
Trade body the Scotch Whisky Association threw its weight behind the deal, which is the biggest in India since Edinburgh oil company Cairn Energy sold a stake in its local arm to Vedanta Resources last year.
Gavin Hewitt, Scotch Whisky Association chief executive, said: "This investment is a further sign of confidence in the Scotch Whisky industry.
"It also illustrates the potential of the Indian market where we look forward to the completion of the Free Trade Agreement which will lead to a tariff reduction benefiting companies across the industry."
Mr Walsh said the deal transforms Diageo's position in India, where United Spirits has a market share of over 40%.
India is the world's largest whisky market. Much of this is locally-produced spirit, although Mr Walsh highlighted the growing enthusiasm for premium spirits which could result in Scotch whisky making a growing impact.
Mr Walsh said he hoped that Diageo could benefit from United Spirits's distribution skills, although he said there were no plans to merge the two businesses.
Mr Mallya will remain chairman of United Spirits.
He said: "I am very proud of United Spirits and what has been created over the last 30 years to bring this company to its pre-eminent position in India."
The deal will free up resources for Mr Mallya, who has been scrambling for nearly a year to raise funds for his airline Kingfisher.