Diageo hopes to prop up United Spirits deal by selling "bulk" of Whyte & Mackay

By Erin Smith

Published: 25 November, 2013

Diageo is offering to sell off a "bulk" of its Whyte & Mackay whisky brands in order to address concerns the Office of Fair Trade (OFT) has had over competition issues in the British whisky market.

The proposed move has been seen as Diageo's attempt to avoid its merger with India's United Spirits Ltd - a deal that is valued at USD 2 billion - from being referred by the OFT to the Competition Commission. Whyte & Mackay is a subsidiary of United Spirits Ltd.

The deal has been the subject of an OFT review since July. It has already ruled against the larger merger between Diageo Plc and United Spirits Ltd after reviewing evidence and deciding the merger could lead to a substantial lessening of competition in the supply of blended whisky to retailers which could potentially lead to rising prices in the UK. It based its decision after looking at consumer sales and trends data, and the abillity of other manufacturers to increase capacity in order to offset the raised competition.

Chris Walters, the OFT's chief economist and decision maker in this case said: "While the undertakings in lieu are being considered, the OFT's duty to refer the merger to the Competition Commission is suspended."

"A number of retailers expressed concerns to the OFT about possible price rises for bottled blended whisky sold in the UK as a result of the merger," said the OFT in its ruling.

The deal, which has Diageo purchase a 53.4% stake in United Spirits, has already been approved by the Competition Commission of India (CCI).

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