Independent USL directors endorse Diageo vote
The independent directors of India’s largest drinks group United Spirits have endorsed plans to make and sell Diageo brands in the country, just weeks after the proposal was rejected by shareholders.
At the end of November, 30% of United Spirits’ minority shareholders rejected the plans amid concerns over royalty payments, a decision Diageo said it was “surprised and disappointed” by.
Stakeholders also said they were unsure whether the agreement was for “the benefit of the company or Vijay Mallya”, the chairman of United Spirits who came under fire last year when he was declared a “willful defaulter of debts” by the United Bank of India.
The UK firm, which completed its acquisition of a controlling stake in United Spirits Limited (USL) in 2014, will attempt to gain shareholder approval at an extraordinary general meeting on 9 January. Under Indian law, 75% of shareholders must approve company proposals.
Diageo said the deal would allow USL to “gain a diverse product portfolio” and extend its “competitive advantage in the premium and above market segments”.
Ahead of this meeting, the Wall Street Journal reports that USL’s board of independent directors, made up of Indu Shahani, Sudhakar Rao, and D. Sivanandhan, has evaluated the motion and recommended that it is approved by shareholders.
According to the publication, while the company cannot directly influence shareholders’ decisions, it is seeking to endorse the vote through its independent directors.
Currently, Diageo’s brands, including Smirnoff vodka and Johnnie Walker whisky, are currently manufactured and distributed in India by its dedicated subsidiary Diageo India.
Diageo completed the acquisition of a 55% controlling stake in USL earlier this year following a series of setbacks. The group ordered an inquiry into loans paid out by United Spirits after the revelation the group had clocked a net loss of £445m in 2013/14.