HIGHLAND Distilleries yesterday launched a takeover bid for Macallan-Glenlivet which values the Craigellachie, Banffshire, malt distiller at #180m.

The bid is part of a deal whereby the Famous Grouse company is merging its 26% stake in Macallan with the 25% owned by Suntory of Japan in a new joint venture company HS Distillers. The union is to develop the Macallan brand more fully than it is at present.

The terms came as something of a shock to the City.

Highland is bidding just 152.5p cash, which is the amount it paid its Remy Cointreau associate for its holding in January this year. There is a partial Highland Convertible bond alternative as well as a loan note.

Macallan shares tumbled 29p to 158p.

They have been buoyed up on bid hopes for a considerable period of time - ever since 1988 when they were trundling along at around 25p before Suntory took a stake. Suntory owns the Bowmore distillery on Islay and also Auchentoshen near Glasgow.

The combined Highland and Suntory holding is 51% compared with the family holdings, chiefly those of chairman Allan Shiach, of about 28%.

Mr Shiach was telephoned by his Highland opposite number John Goodwin on Sunday. He would say little but is holding a board meeting today at merchant banking advisers SBC Warburg in London.

However, it was made fairly clear at the time that Highland acquired the Remy holding that Macallan was not too happy. Significantly Highland made no attempt to create an agreed merger.

Highland chief executive Brian Ivory praised Macallan but it was not big enough to flourish on its own. It has no particular links with an overseas distributor, he added.

The bulk of Highland's exports are handled by Remy Cointreau in which it has an indirect 17% stake.

Macallan has exports of 150,000 cases of malt which compares with 50,000 or so of Highland's malts led by Orkney's Highland Park. Control would mean securing future Macallan fillings for blending with Famous Grouse.

The value of the Suntory link with the privately-owned Japanese company already handling Macallan in Japan is that it would use its expertise in building up other Asian markets.

Highland refused to spell out the scale of the cost-cutting. Mr Ivory said there would be redundancies but would not give any indication as to their number.

However, its own Highland malt distilling functions such as operating the five group distilleries, purchasing and services totalling in all 180 people would be transferred from West Nile Street to Craigellachie where Macallan currently employs 65 people.

He added there would be substantial savings if Macallan were to be delisted as a plc and the elimination of its head office function.

At the offer price, Macallan would be taken out on a price earnings ratio of 31.3 which is over twice the rating of the sector.

The bid is final and so cannot be increased.

Highland argued that Macallan had shown a fall in shareholders return over the past five years of 30% compared with a drinks industry average gain of 23% and of 58% at Highland.

However, Highland's own half-time profits were 6% lower at #22.2m, the first setback in a decade.

In 1995, Macallan achieved pre-tax profits of #7.09m and paid a dividend total of 1.455p. That gives a yield on the offer price of 1.2%.

If the offer is accepted in full, there there would be a cash requirement of #88m. A complete refinancing totalling #160m has been agreed with Highland's banks.