Diageo in talks to buy United Spirits stake

Diageo has confirmed reports that it is in discussions with India’s United Spirits to potentially acquire a stake in the company owned by billionaire Vijay Mallya.

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

The world’s biggest drinks company has been seeking to increase its foothold in emerging markets for some time, and has previously expressed interest in United Spirits, which is reportedly valued at around £1.5bn.

While in 2009 Diageo walked away from discussions following a disagreement over valuation, at its year-end results presentation earlier this month chief executive Paul Walsh expressed his continued interest in taking a minority stake at the company.

Mallya, who owns a 28% stake in United Spirits, is reportedly looking to raise US$600m to support his airline Kingfisher, which is currently making a loss.

However, both parties have been quick to play down suggestions of a Diageo takeover, releasing a joint statement that confirmed Diageo was in discussion with both United Spirits Limited and United Breweries (Holdings) Limited “in respect of possible transactions for Diageo to acquire an interest in United Spirits Limited. However there is no certainty that these discussions will lead to a transaction.”

United Spirits currently produces some of the world’s fastest growing Scotch brands for the Indian domestic market, including McDowells No 1 and Bagpiper, both of which sell around 16m nine-litre cases per year. It also owns Whyte & Mackay

Any deal would give UK-based Diageo a grip on the local Indian spirits market, which is notoriously difficult to penetrate.

Analysts expect discussions to come to a head “very soon”.