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Diageo buys 2.4% more of United Spirits for $138M

31 January, 2014

Diageo Plc, the world’s-largest spirits maker by revenue, has hiked its stake in United Spirits by acquiring another 2.4 per cent from a foreign portfolio investor for Rs 866 crore ($138 million) on Friday. Its holding now stands at 28.7 per cent.

It acquired the shares from OppenheimerFunds Inc, which sold almost its entire holding. The foreign investor held 2.7 per cent in United Spirits, the world’s largest spirits maker by volumes, as of December 31, 2013.

In 2012, Diageo had signed a deal to acquire up to 53.4 per cent of United Spirits, in a multi-tiered transaction worth as much as $2.1 billion. Around 27.4 per cent stake was to be purchased through a mix of preferential allotment and stake purchase from UB Group while the rest was proposed to be acquired through an open offer.

It had managed to buy just 25.02 per cent of United Spirits, less than half of its original plan after its open offer failed and the quantum of shares bought from Vijay Mallya’s UB Group and out of the treasury stock of the firm was less than what it had envisaged. It shelled out around $880 million for buying this stake.

Diageo had managed to buy a mere 0.04 per cent in the open offer as the share price had climbed much higher compared to what Diageo had offered.

Late last year it purchased 1.96 million shares from the open market at Rs 2,400 per share valuing the transaction at Rs 472.31 crore ($75.5 million). Part of the stake was acquired through a bulk deal from Morgan Stanley Asia (Singapore) Pte, which sold off 3.9 million shares on the BSE. This had taken Diageo’s holding to 26.3 per cent.

It has been buying shares even as it is facing a new challenge with the Karnataka High Court ruling the sale of United Spirits by UB Group as null and void.

The regional court gave its ruling last month over a winding up petition filed by a lender to UB Group’s defunct Kingfisher Airlines whose debt was guaranteed by United Breweries Holdings, a public listed firm with stake in both the airlines as well as United Spirits.

Diageo has also been facing problems to acquire shares from IDBI, one of the lenders to UB Group which holds some of the pledged shares of United Spirits.

Although Diageo could not manage to buy half of the Indian firm, as envisaged, by virtue of being the single-largest shareholder and say in the board with its nominees, Diageo is in the driver’s seat. In the original agreement it had ensured that if Diageo is unable to obtain majority shareholding, UB Holdings will vote as directed by Diageo for a four‐year period.

Related

Karnataka High Court says UB Group’s sale of United Spirits to Diageo invalid

Diageo may launch another open offer for United Spirits, picks 1.3% for over $75M

Diageo considers selling almost all of Whyte & Mackay as part of United Spirits deal

(Edited by Joby Puthuparampil Johnson)


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Diageo buys 2.4% more of United Spirits for $138M

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