UK & India & South Africa: Diageo, United Spirits complete JV on sorghum beer in South Africa

London-based Diageo Plc. has completed its joint venture with India’s largest spirits company United Spirits Limited, to own United National Breweries' traditional sorghum beer business in South Africa, Zacks reported on January, 29.

Diageo has bought 50% of the business for approximately 25 million pounds sterling ($36.0 million). The remaining half of the company will be held by a company affiliated to Dr. Vijay Mallya, Chairman of United Spirits Limited.

The deal dates back to November 2012, when Diageo and Mallya had signed a Memorandum of Understanding (MoU) for the traditional sorghum beer business of South Africa-based United National Breweries. The 50-50 joint venture will foray into certain emerging markets of Africa and Asia (excluding India).

Along with the signed MoU, Diageo also agreed to acquire a 53.4% stake in United Spirits for 1.285 billion pounds sterling ($2.05 billion), in order to venture into the fast growing alcohol market in India. Besides financial strength, the acquisition is expected to help to reduce debt and provide United Spirits with the opportunities it seeks. For Diageo, United Spirits will not only open up the growing market Indian market, but also assure access to a burgeoning middle class and a rising beer consumption trend.

Entrepreneur Mallya sold the 53.4% stake in United Spirits to Diageo as he requires sufficient cash to bail his Kingfisher Airlines out of bankruptcy.

Diageo, the owner of leading brands like Guinness, Smirnoff and Johnnie Walker explores opportunities to expand geographically through acquisitions, within its financial criteria.

30 January, 2013