Diageo offers to sell Whyte & Mackay Scotch whisky arm

Diageo acquired Whyte and Mackay's business after taking a stake in India's United Spirits

Diageo, the world's biggest Scotch whisky distiller, has offered to sell most of its Whyte and Mackay business to appease competition authorities.

It acquired the famous whisky brand when it secured a stake in India's United Spirits in late 2012.

As the deal increased Diageo's share of the blended whisky market to about 40%, the Office of Fair Trading (OFT) was concerned this could reduce competition and raise prices for consumers.

The OFT is considering Diageo's offer.

Drinks giant Diageo, whose brands include Johnnie Walker, Guinness and Smirnoff, agreed to pay £594m ($962m) for a 25% stake in Vijay Mallya's United Spirits.

Whyte and Mackay, which Mr Mallya bought in 2007 for £595m, is a major sponsor of the Force India Formula One motor racing team.

Before the merger, there had been "substantial competition" between Diageo's Bell's whisky and Whyte and Mackay's own-label brand, the OFT said.

"Our investigation considered a wide range of evidence and we concluded that the likely loss of competition could give rise to higher prices for retailers, and ultimately consumers," said OFT chief economist Chris Walters.

"We are now considering Diageo's offer to sell the bulk of the Whyte & Mackay business with the exception of two malt distilleries, to address our concerns."

The distilleries mentioned are Dalmore and Tamnavulin.

Garry White, chief investment commentator at stockbroker Charles Stanley, said: "Should the regulator accept the offer to sell the bulk of the Whyte and Mackay business, the price doesn't seem too high to gain a significant position in India - the world's fastest-growing whisky market."

The OFT had been mulling referring the deal to the Competition Commission.

9In April 2014, a new body, the Competition and Markets Authority, will become the UK's lead competition and consumer body.