India: United Breweries Holdings sells 74 % stake in United National Breweries of SA

United Breweries Holdings Ltd (UBHL), which owns and operates Vijay Mallya's companies, is selling its 74 % stake in United National Breweries (UNB) of South Africa to UNB's management. UBHL, which is selling the stake as it wants to exit the business of making beer based on sorghum, expects to gain $22.6 million from the sale.

United Breweries Ltd will build a brewery each in Orissa and Rajasthan and upgrade its existing facilities, with an investment of Rs500 crore during 2006-2012.

It has been using the services of a third-party brewer in the two states. Earlier, Mallya, who has 51% share of the domestic 120-million case beer market, had announced plans to invest around Rs 500 crore to expand existing capacities.

This, along with the new projects, will double UB’s existing annual capacity to 110 million cases by the end of the decade. Mallya’s South African venture took off in 1997 in the post-apartheid regime. His investments involved a 34% stake in the ailing state-owned National Sorghum Breweries and the Mabula Game Reserve.

While the latter was a personal investment, United Breweries Holdings, the investment arm put in money in the venture with 18 breweries.

Mallya was inebriated by the market potential. UNB brewed 410 million litres of the thick sorghum beer, and it was largely patronised by the local empowered black population. The 3,810 million litre beer market was dominated by light lager beer produced by South African Breweries Plc Miller.