UK & India: Diageo offers $1.9 bln to hike its stake in United Spirits

Diageo Plc of the UK on April 15 offered to pay Rs 11,448 crore (around $1.9 billion) to hike its stake in United Spirits Ltd in a second attempt to tighten its grip in India’s leading liquor company, The Financial Express reported.

The world’s largest spirits maker, which holds 28.8 per cent of USL and has management control, has offered to acquire another 26 per cent of USL for Rs 3,030 per share, aiming to boost its shareholding to as much as 55 per cent. This is more than double of Rs 1,440 per share it offered USL shareholders in its last open offer in November 2012.

Diageo’s tender offer to buy shares at a premium of 18.5 per cent to their last closing price sent the USL stock surging by 11.58 per cent to Rs 2,853.15 on the BSE on April 15. If the offer becomes successful, Diageo’s investment would cross Rs 18,000 crore.

USL was previously controlled by Vijay Mallya, who has shed assets under heavy debt and the collapse of his Kingfisher Airlines Ltd. However, he remains chairman of United Spirits but the management of the company is under Diageo. Mallya’s UB Group owned 10.46 per cent of United Spirits at the end of December. Last year, Diageo completed the purchase of its existing stake in USL, settling with considerably less than it had sought after a 2012 tender offer failed when it opted not to raise its offer price.

Diageo, the maker of Johnnie Walker scotch and Smirnoff vodka, controls USL through its holding and a shareholder agreement, and the tender offer is unlikely to result in any management changes.

16 April, 2014