British spirits major Diageo plc has appointed Ivan Menezes as the new chief executive officer with effect from July 1, 2013. Indian-origin Menezes, who is at present the COO at the world’s largest spirits company by revenues, will take over from present CEO Paul Walsh who has been leading the firm for the past 13 years.
Walsh, who will step down from the board at the September 2013 annual general meeting, will retire from the company in June 2014.
“In the last 12 months he will focus on transitioning critical partner and external relationships to Ivan. These will include those relationships essential to recent acquisitions,” said Franz B. Humer, chairman, Diageo.
He said, “The handover is being made at a time when the business is strong and Ivan takes on the role of CEO at an exciting stage of the company's global development.”
Menezes has been the COO of Diageo since March 2012. In this role he oversees the commercial operations of Diageo globally. Menezes also sits on the executive committee and the board of directors of Diageo.
Prior to his appointment as COO, Menezes was president and CEO of Diageo North America for eight years. During this period he was also made chairman, Asia Pacific from October 2008 and chairman, Latin America and the Caribbean from July 2011.
He had joined Diageo in 1997 and held various senior management positions with Guinness and then Diageo until 2004 when he was appointed president of Diageo Venture Markets. Diageo Venture Markets is a division that had direct responsibility for approximately 123 countries, representing nearly 70 per cent of the world’s population.
Prior to his career with Diageo, he worked across a variety of sales, marketing and strategy roles for Whirlpool in Europe, Booz Allen Hamilton in North America and Nestlé in Asia. Menezes holds MBAs from Northwestern University’s Kellogg School of Management and IIM Ahmedabad.
Diageo operates through brands across spirits, beer and wine, including Johnnie Walker, Crown Royal, J&B, Windsor, Buchanan's and Bushmills whiskey, Smirnoff, Ciroc and Ketel One vodka, Baileys, Captain Morgan, Jose Cuervo, Tanqueray and Guinness.
India proving a tough nut to crack:
Menezes’ appointment is seen as a strong push from Diageo into emerging markets, but the incoming chief faces a tough task in his birth place.
Diageo struck a marquee deal last year to acquire a significant minority stake in Vijay Mallya-led United Spirits, the world’s largest spirits maker by volume. While this catapulted it into market leadership in one of the top emerging markets, it seems unlikely to manage a controlling stake in the firm, as it would have hoped, anytime soon.
The firm had made a mandatory open offer to buy 26 per cent stake from the public as part of a larger deal worth $2.05 billion.
The offer was made at Rs 1,440 a share. This was almost twice the price at which United Spirits was trading when VCCircle first reported on the impending deal last July. However, after announcement of the deal in which Diageo is picking a large chunk of promoters holding besides fresh shares through a preferential allotment, United Spirits’ scrip has rocketed and trades around Rs 2,320 a share. This made the open offer redundant.
Last week Wall Street Journal reported that the offer has failed to garner any significant quantum of shares, as expected. CNBC separately reported that the open offer managed to garner only around 3.9 per cent stake. A formal announcement on the shares tendered in the open offer is pending, but if Diageo indeed has managed only around 3.9 per cent stake in the offer it would end up with 31.3 per cent holding in United Spirits. This would mean the total deal value would be around Rs 6,540 crore ($1.2 billion) as against original proposal worth Rs 11,166 crore ($2.06 billion), as per VCCircle estimates.
This would not give it a majority stake, though it would get a veto power in the board (by virtue of holding over 26 per cent stake in the firm). Less than 50 per cent holding would also not allow Diageo to include United Spirits financials in its consolidated numbers and United Spirits would become an associate firm of Diageo.