Diageo takes control of United Spirits

5th July, 2013 by Becky Paskin

Diageo has become the major shareholder of United Spirits, having completed the acquisition of a further 15% share in the Indian drinks company.

United Spirits Scotch

Diageo now has a controlling stake in United Spirits, which produces the world’s number one whisky brand, McDowell’s

The additional shares, priced at INR 1440 per share (INR 31bn/ £344m overall), together with the 14.5 million shares purchased in May and the 58,000 acquired in its mandatory tender offer, bring Diageo’s total interest in United Spirits to 25.02%.

After 10 months of negotiations, Diageo is now the major shareholder of United Spirits, despite failing to meet its initial target of acquiring 27.4%.

Diageo is still waiting to complete the transfer of 2.38% worth of shares from certain lenders to United Spirits as they are “refusing to release security that they hold over the 3,459,090 USL shares”.

While Diageo notes that these lenders have been paid, it said: “USL believes that this refusal is in clear breach of the applicable contractual arrangements. Accordingly, USL and the trustees of the USL Benefit Trust are taking steps to expedite release of the security to enable the balance of the sale under the Share Purchase Agreement to Diageo Bidco to take effect as soon as practicable.”

Dr Vijay Mallya, chairman of UB Group, parent company of United Spirits, will remain in his position as chairman of USL. Meanwhile Gilbert Ghostine, president of Diageo Asia-Pacific, will become a non-executive director of USL as will Ravi Rajagopal. Diageo has also appointed PA Murali as CFO and executive director of USL.

Ivan Menezes, the newly-appointed chief executive of Diageo, who took over the position from Paul Walsh on 1 July, said: “USL’s strong market-leading position combined with Diageo’s strength and capabilities opens an exciting and important new chapter for Diageo in the attractive Indian spirits market.

“Since we received approval for this transaction we have been getting ready for closing and integration. Having completed the share purchase, we will now begin the work to identify and capture the significant growth opportunities within this attractive market.”

He added that the acquisition has transformed Diageo’s position in India – one of the world’s fastest-growing spirits markets.

“India will become one of Diageo’s largest markets and with its increasing number of middle class consumers looking for premium and prestige local spirits brands as income levels rise it will also become a major contributor to our growth ambitions.”

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