Highland buys 26% stake in Macallan

CLIFFORD GERMAN

Highland Distilleries, the owner of Famous Grouse, the best-selling blended Scotch, yesterday paid pounds 46.6m in cash for a 26 per cent stake in Macallan- Glenlivet, owner of some of the best-known premium malts.

Highland acquired the distribution rights for the Macallan brands in the UK in 1994, and the Famous Grouse and the Macallan complement one another in the UK, Highland's managing director, Brian Ivory, said yesterday.

Highland sold a 12 per cent stake in Macallan to Remy Cointreau for pounds 31m in 1990 as part of a share swap and marketing deal, and has now paid pounds 46.4m for double its original holding. Remy has been selling assets to reduce its pounds 250m debt mountain, but retains its 9.4 per cent stake in Highland.

Highland bought its stake for 152.5p a share, a 15 per cent discount on last Friday's market price of 182p. It has still paid 35 times Macallan- Glenlivet's current earnings, but sales of Macallan malt have been held back by a shortage of stock which is now easing, industry sources said yesterday, and sales are rising with the help of a clever advertising campaign. Mr Ivory expects the acquisition to dilute earnings by 2 per cent in the first year.

Macallan shares fell 18p to 160p yesterday while Highland shed 6p to 320p. Scotland's broking community gave its approval yesterday. "The earnings multiple is a high one, but given the quality of the sector it makes good sense for Highland to tie up with the Macallan brand," said Alan Gray, analyst at the Edinburgh-based brokers Sutherland & Partners.

Investment Column, page 18