MANILA - Shares of Philippine liquor firm Emperador Inc are likely to jump once a trading suspension on its shares on Monday is lifted as analysts expect its $729 million purchase of a Scottish whisky company will boost its long-term profits.
The Philippine Stock Exchange imposed the trading suspension pending Emperador's compliance with disclosure requirements, it said in a statement. The deal is still subject to approval by regulators and stockholders.
On Friday, Emperador, the country's largest brandy maker, sealed its biggest acquisition to date via a cash offer to buy Scottish whisky maker Whyte & Mackay Group Ltd and its subsidiaries for 430 million pounds ($729 million).
Analysts expect Emperador shares to rise once the trading suspension is lifted, saying the liquor maker's P20 billion ($551 million) cash position at end-2013 would help to fund the deal.
The Whyte & Mackay acquisition will also boost Emperador's long-term earnings and help achieve its goal of doubling profits by 2017, analysts said.
"On the long term, it would benefit Emperador since it would translate to additional profits. It acquired a well-known brand globally. This would improve their market share," said Lexter Azurin, Unicapital Securities Inc head of equity research.
Whyte & Mackay is a unit of India's United Spirits Ltd, which is in turn controlled by Diageo Plc. The group had to sell the company, the world's fifth-largest maker of Scotch whisky with annual production capacity of 50 million litres, due to UK anti-trust issues.
Emperador said the deal was in line with its plans to expand its portfolio.
"Whisky is the second-fastest growing spirits segment in the world next to brandy," Emperador Chairman Andrew Tan, also the Philippines' third richest man, said in a statement on Monday.
"The global demand for Scotch whisky has shown strong growth over recent years and is expected to continue this momentum going forward," he said.
Tan added Emperador's brandy products will have access to Whyte & Mackay's global distribution network in more than 50 countries mainly in Europe and North America.
Last March, Emperador unveiled a plan to extend the market reach of its brandy products to about a third of the global market in four years.
Emperador shares were up 13.8 percent so far in the year before its suspension, underperforming Manila's main stock index, which has gained 16.3 percent year-to-date.
The deal is valued at 19.3 times estimated 2014 earnings before interest, tax, depreciation and amortization (EBITDA), against Emperador's 22 times estimated EBITDA, Azurin said.
It was Emperador's second major acquisition this year. Last February, it bought a 50 percent stake in Bodaga Las Copas SL, a unit of Spanish liquor conglomerate Gonzales Byass SA. It also bought Spanish brandy maker, Bodega San Bruno SA, last year.