Whisky producers may link up

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The Independent Online
Nigel Cope

City Correspondent

William Grant & Sons, one of Scotland's best known whisky distillers and the producer of the Glenfiddich single malt, could be close to a link-up with one of its struggling rivals.

The Scotch whisky industry is rife with speculation that William Grant is in talks with Burn Stewart Distillers, the publicly quoted whisky group which has seen its shares slump following a dispute with its auditors.

Though the deal is expected to stop short of a full-scale takeover or merger, it is thought that William Grant may take a stake of up to 49 per cent in Burn Stewart. It would involve Stewart issuing new shares while the two groups would pool their own-label operations which produce Scotch for supermarkets.

The details are included in the May issue of Scottish Business Insider, which was published yesterday. It says the two sides have been in talks for some time and that Grant was initially seeking as much as 50 per cent of Stewart.

Neither company was available for comment yesterday. However, Alan Gray, the whisky expert at Sutherlands, the Edinburgh broker, said: "I can't say whether there is any truth in it, but it is certainly plausible."

One London analyst commented: "It wouldn't surprise me for one minute. Both groups have own-label operations and they have been under-cutting each other for some time. Putting the two divisions together would ease competition and improve margins."

The deal would help Burn Stewart as it has high gearing and has been under pressure since an accounting dispute forced it to defer pounds 2.3m of profits until the second half of the current year.

For William Grant, the pooling of resources in the own-label market would be one benefit. The deal could also involve a clause under which Burn Stewart would buy its grain whisky from Grant.

William Grant & Sons is privately owned and run by the Grant Gordon family. It made profits of pounds 26.9m on sales of pounds 254m last year. Burn Stewart's profits slumped from pounds 4m to pounds 1m last year due to the deferred profit on whisky stocks.

Burn Stewart shares remained unchanged at 60p yesterday. They were floated at 140p in 1991.