Diageo disappointed over another United Spirits hurdle

Diageo’s purchase of United Spirits has hit another hurdle this week as a regional Indian court annulled the deal.

Diageo is looking to buy a stake in United Spirits’ domestic Indian brands

The acquisition, which was officially completed in July this year following 10 months of negotiations, has been void following a ruling from Karnataka High Court in southern India.

It is thought the obstacle is in response to a petition launched by creditors of United Breweries Holdings, which sold its stake in United Spirits.

Although Diageo had completed the acquisition of 25.02% of United Spirits in July, it has been waiting to complete the transfer of a small proportion of shares from certain lenders to United Breweries.

However those creditors have now blocked the deal in the hope of recovering the shares themselves to recover unpaid debt.

Both Diageo and United Breweries chairman Vijay Mallya said they would appeal the court decision.

“We do not believe that there are any grounds for declaring the sale of the [6.9% of] shares in United Spirits Ltd. purchased by Diageo on 4 July 2013 from United Breweries (Holdings) Ltd. as void,” the company said in a statement.

“We are disappointed to hear that the court has overruled the previous order of the High Court of Karnataka [which approved the sale].”

Analysts believe the ruling is unlikely to halt the deal completely, but could raise questions around Diageo’s total, final share of United Spirits.

Back in the UK, Diageo is also facing the prospect of selling a proportion of Whyte & Mackay – the Scotch whisky business it acquired along with United Spirits – to ease competition concerns.