MUMBAI, India (AP) — India's UB Group, the world's third-largest maker of spirits, said yesterday it is buying Scottish distiller Whyte & Mackay Ltd. for $595 million ($1.2 billion).The all-cash acquisition will help expand the market for Whyte and Mackay brands of Scotch whisky through UB Group's large sales network in emerging economies, while the Indian company will benefit from new market access in Europe and North America.

It will also add Scotch whisky to UB Group's portfolio of products.

"Scotch has been a missing link in our portfolio," chairman Vijay Mallyahe told reporters in a video conference from Glasgow. "With the acquisition of Whyte & Mackay, we now have a captive supply source and excellent (Scotch) brands, which we will immediately introduce in China, Middle East and India."

India's middle class, with its rising incomes, is increasingly drinking Scotch whisky and wine.

Mallya claimed that the acquisition will help elevate UB Group, which currently ranks third after Pernod Ricard of France and Diageo of Britain, to the No. 2 slot.

The transaction will be done through United Spirits Ltd., part of the UB Group, which also operates fertiliser factories, construction companies and Kingfisher Airlines, named after UB's popular beer brand.

Mallya has previously said he wanted to acquire businesses in Europe to turn the UB Group into a global player and to meet the changing demands of Indian consumers.

Glasgow-based Whyte & Mackay, which sold a record 9 million cases in the past year, commands close to 10 percent share in the world market for Scotch whisky. It also has a large stock of aged single malt whisky.

Its brands include, among others, The Dalmore, Isle of Jura, Glayva, Fettercairn and Mackinlays, besides the popular blended Scotch that goes by the company's name.

The current inventory of Whyte & Mackay is valued between $350 million and $400 million ($690 million to US$790 million), Mallya said, adding that the company owns nearly 140 brands, many of which are now dormant but can be revived in future.

"This opportunity with United Spirits will open up international distribution in emerging markets, which has been a weak point in the company," said Vivian Imerman, the chief executive of the Scottish company.

Imerman will quit the CEO post and take up a new role as Strategic Adviser to Mallya with responsibilities in bulk Scotch trading and special projects such as expansion of distilleries.

Mallya said the acquisition would not result in job cuts at Whyte & Mackay and that the company wanted to invest more in Scotland.

"We are planning to expand capacity in Invergordon," he said. Whyte & Mackay's Scotch whisky distillery at Invergordon is one of the world's largest with a capacity to produce 40 million litres of alcohol annually.

Whyte & Mackay will be run as a separate subsidiary and not merged with United Spirits, Mallya said. It will add to UB's earnings, he said, in an apparent reference to criticism that he might be overpaying for the acquisition.

Shares of United Spirits rose 7 percent to 896.85 rupees ($21.80).

The Indian distiller will borrow $325 million against Whyte & Mackay's assets to help finance the purchase.

Mallya said he has no plans to cut jobs or sell any of Whyte & Mackay's brands, some of which may be reintroduced. He may also tap the capital markets in London for listing the company's spirits business.

"Listing our business on an overseas exchange is important to give us currency to make further acquisitions," Mallya said. "It makes sense to list United Spirits as a whole."

The UB Group has 69 factories across India, where rising disposable incomes and mushrooming of pubs have spawned a new set of spirits buyers.

"India is emerging as an important center for Scotch whisky consumption, with demand for Scotch growing at 30 percent per annum, albeit coming off a very low base," Citigroup Global Markets said in a research note to its clients yesterday. "With Indian consumers trading up from lower-end to high-end whiskies, demand for bulk Scotch for blending with local whisky is also increasing rapidly," according to the note that said "chances of a negative surprise from the acquisition are slim."