E-Malt.com News article: India: Global buys pushed United Breweries to drag Heineken to court

When global beer giant Heineken took control of Scottish & Newcastle along with Carlsberg, threatening to get an entry into United Breweries (UBL) where S&N is a joint promoter, Vijay Mallya swung into action, according to TNN, May 8.

Along with his legal team, he evaluated options and launched his attack. S&N has several special privileges and rights on the UB board. Mallya was determined that Heineken should not inherit those. He had no problems with Heineken being a partner but wanted the Dutch giant to work out a separate agreement on rights and privileges with him.

In the last week of March, Mallya and his group companies including United Breweries Holdings, filed a suit in the Bombay high court against Heineken, Carlsberg and certain employees of S&N seeking termination of the special rights and privileges granted to S&N under the deal.

They also wanted a permanent order and injunction restraining S&N or Heineken from exercising any of those rights. The suit also seeks to restrain the S&N employees, including the CFO of UB, from seeking any confidential information about UBL and from carrying out duties as directors of UBL. The suit is yet to be heard.

At first glance, it would appear UB is heading for a pitched battle with Heineken. Mr Mallya, with his larger-than-life image and penchant for taking the battle to the opposition camp, is sounding the bugle for a protracted clash of arms with the Dutch giant.

On second thoughts, it does not appear to be so. Mallya’s move seems to be a carefully planned tactic to protect his flanks, exploit the legal options available and put pressure on Heineken to come to an agreement with him. There is a lot at stake for UB in this. UBL is one of Mallya’s flagship companies running the hugely successful beer business.

Kingfisher is one of India’s best selling beer brands. Letting a rival like Heineken exercise any kind of control would certainly not be to Mr Mallya’s liking.

The development that pushed UB and Heineken to this point was the global acquisition. But what was equally important was that S&N had a number of special privileges in UBL. Among the important personal rights UB is particularly sensitive about are the right to appoint a CFO, the right to appoint two directors in the company, and access to the confidential information about the company.


08 May, 2008