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USL takeover gives Diageo ‘unassailable’ position

Following its acquisiton of United Spirits, Diageo has achieved an “unassailable” position as the world’s leading spirits producer by volume, analysts have confirmed.

United Spirits Scotch
Diageo successful tender offer to acquire India’s United Spirits gives it an “unassailable” position in the global spirits market

According to reports, Diageo’s £1.1 billion tender offer to acquire a further 26% of shares in India’s United Spirits Limited (USL), taking its total stake to 55%, successfully closed on 19 June.

The maker of Johnnie Walker Scotch and Smirnoff vodka offered 3,030 rupees for each share in Bangalore-based USL – India’s dominant spirits group – which is an 18% premium on the company’s share price.

Analysts at research agency Euromonitor International have since said that Diageo’s apparently successful tender offer for USL, makers of former world’s best-selling whisky McDowell’s, will give the UK company over 9% of global spirits volumes and nearly two billions litres in volumes.

Euromonitor also said that Diageo will also become the “leading player globally” in the whisky and rum sectors, and will also further strengthen its position in the vodka market.

Combined, United Spirits and Diageo will command over 30% of total global whisky volumes, around 17% for rum, almost 10% for vodka and brandy, and 15% for gin.

“The key benefit for Diageo will be the access to United Spirits’ unrivalled distribution network and knowledge in a country where in effect each of the 27 states is a different country,” said Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor .

However, analysts also noted that the acquisition has also encountered difficulties, such as the delay of United Spirits’ published financial results.

The acquisition will also “completely change” to geographic profile of Diageo’s markets, analysts say, “almost reversing” the dynamic between its mature and emerging market geographic spread in volume terms.

While in 2008, the emerging markets made up around 25% of Diageo’s volumes, they now represent around 65%.

Diageo has not yet commented on this recent acquisition.

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