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    Kishore Chhabria joins fray for 50% rights of disputed brandy brand Mansion House

    Synopsis

    This move will now pit Chhabria against Amit Dahanukar-led Tilaknagar Industries, which is the country’s 5th largest distiller.

    ET Bureau
    MUMBAI: Veteran warhorse Kishore Chhabria is back to being his pugnacious best.

    The man who fought epic legal battles with his brother Manu and later with Vijay Mallya over ownership of liquor companies Shaw Wallace and Herbertsons, has joined the battle against Tilaknagar Industries over Mansion House, a popular brandy brand.

    On a high after becoming the biggest Indian spirits tycoon, Chhabria controlled Allied Blenders & Distillers (ABD) has struck a deal with Dutch distiller Herman Jansen to acquire rights over the Mansion House brandy trademark for India and South Asian for an undisclosed sum. At a press conference in Mumbai ABD’s CEO Deepak Roy said the company has acquired 50% of the brand rights. Even though he did not elaborate on the financial details, sources said the brand has been valued at around Rs 220 crore. So Chhabria is likely to pay out half that sum over a period of time.

    But this move will now pit him against Amit Dahanukar led Tilaknagar Industries, the country’s 5th largest distiller, which is already embroiled in a long-running dispute with the Dutch family owned company over the ownership of the popular brandy brand.

    What makes the confrontation more heady is the fact that Chhabria had in the recent past made an unsolicited offer to buy out Mansion House and other brands of Tilaknagar, only to be rebuffed. The move had at least temporarily tripped Dahanukar’s fund raising plans after Tilaknagar mandated domestic investment bankers to raise equity.

    Tilaknagar, burdened with Rs 743 crore debt (as on FY ’14) and various other corporate governance allegations, has an ambitious plan to ramp up sales. It reported Rs 616 crore revenues with a net profit of Rs 49 crore last fiscal.

    "The assignment of the trademarks (Mansion House and Savoy Club) during pendency of judicial proceedings is illegal. Neither the assignors (Herman Jansen) nor the assignee (ABD) are entitled to use the trademarks Mansion House and Savoy Club as it would tantamount to violation of TI's rights in the trademarks. It has also been upheld by the Bombay High Court," said Amit Dahanukar, the promoter of Tilaknagar.

    By putting his weight behind Jensen, alcohol industry watchers see this as a vintage Chhabria move to up the ante against Dahnukar, forcing him to sell.

    "So far Mansion House has not been fully exploited in India. With our marketing prowess and distribution strength, we will be able to unlock the true potential of the brand," said Deepak Roy, Executive Vice Chairman & CEO, ABD. "We have studied the case very carefully and have been advised in favour of it," he added.

    Image article boday

    "This is the only market where we have struck a brand related JV. India is unique and to have a partner always helps, said L.W. De Jong, VP, Export & Business Development, Herman Jansen Beverage Group B.V.

    With sales of 4.9 million cases last calendar, Mansion House is the second biggest selling domestic brandy and the mainstay for BSE-listed Tilaknagar. United Spirit's McDowell's No. 1 is the top selling brandy in the country with sales of 9.2 million cases as of December last year. Brandy is the 2nd largest category contributing 25% to the Indian made foreign liquor (IMFL) industry and is among the fastest growing category in the last few years.

    "We are still open to acquiring the brands and assets of Tilaknagar. It’s up to the Dahanukar family to decide," said Roy.
     
    THE DISPUTE

    Tilaknagar, which entered into a pact with Herman Jensen (formerly UTO) 30 years ago, claims the latter ceded the rights of Mansion House brandy to rescue itself from a court action in Rotterdam in 1987.

    Under this arrangement, Jensen would retain Mansion House brand in whisky, which was a bigger business then. The Dutch side argues that the arrangement was never legally solemnized and moved courts in 2008, by which time Mansion House brandy had emerged as a formidable brand in the local market.

    In December 2011, a single-bench order of the Bombay HC had held that Dahnukar and Tilaknagar had the rights to Mansion House in India, but Herman Jensen went on to appeal before a division bench. Tilaknagar, last month, has also sought diplomatic help from the Netherlands to settle the dispute.

    WHAT’S IN IT FOR CHHABRIA

    Chhabria’s Allied Blenders & Distillers (ABD) already has a winner in its flagship Officer’s Choice – the world’s largest selling whiskey brand. Last year, OC sold 23.8 million cases world-wide, mostly in it’s the domestic market, eclipsing the Diageo best seller Johnnie Walker by 3.7m cases.

    "With OC and Mansion House, Chhabria clearly gets huge sales and distribution leverage in the key southern markets. Mansion House will help them earn respect from distributors which will enhance ABD's overall reputation as well. So far, ABD has been a one pony show and the positive stroke by Mansion House will be very strong for ABD's other national or regional brands," said Harish Bijoor, a management consultant.

    “This is classic Kishore Chhabria. He loves these sticky situations. Remember he fought his own brother Manu over BDA Distillery, a Shaw Wallace arm and later became a friend turned foe of Vijay Mallya before eventually smoking the peace pipe with him,” recalls a South-based industry veteran on condition of anonymity.

    The brothers Chhabria had in the 1980s teamed up to acquire the Kolkata headquartered company but ended up in a bitter legal dispute. Manu, had then, charged his brother for surreptitiously transferring BDA shares to himself.

    As bitterness between the brothers grew, Chhabria partnered with former arch rival, Mallya and became a stakeholder in Mallya's Herbertsons that housed Bagpiper whisky. BDA, in return, became a subsidiary of that company.

    Subsequnetly, even the partnership between Mallya and Chhabria became controversial. Mallya alleged that Chhabria had, again on the quiet, started to buy shares of Herbertsons from the market and a result his stake in the company became perilously close to Mallya's. Legal cases followed only to get settled in 2012 – a move many saw as a precursor to the Mallya-Diageo deal.


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