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KKR, Blackstone in Race for United Spirits Stake

01 July, 2009

Private equity majors like Kohlberg Kravis Roberts & Co (KKR), Blackstone and Capital International are reportedly in race to acquire stakes in Vijay Mallya’s United Spirits (USL). These investors are looking to buy stake worth $250-300 million in the company, which is the world’s third-largest liquor marketer, reports Economic Times. The development comes a day after USL sold a little more than 10% stake in the open markets, netting a sum of around Rs 1,000 crore.

ET reports that the three PE investors have given term sheets to the company, although it’s not independently verified.

The PE investors are currently doing due diligence and may end up picking up a stake of 10%, the report adds. The stake will be acquired through issue of fresh shares, and sale of the remaining treasury stock. USL has around 18 million in treasury stock, which were generated from the overlapping capital of merging group companies.

The stake sale will be above the current market price of USL. The stock closed on Tuesday at a price of Rs 873 per share, which dipped due to group company Shaw Wallace & Co’s sale of about 10 million shares of USL in the open market.

The buyers in the yesterday’s open markets sale were Emerging Markets Growth Fund, Capital International, DWS Investment, Reliance Mutual Fund and T-Rowe Price.

Mallya is raising funds to pay off the Rs 6,900 crore debt on his company’s books. UB Group’s recent acquisitions have been funded by debt, including the $827 million acquisition of Whyte & Mackay. The deal will help UB deleverage its balance sheet, which is its first priority. The firms is looking to deleverage to a level of Rs 2,000-2,500 crore.

USL is expected to repay $90 million for Whyte & Mackay loan this fiscal, but pressure could go up in FY11 when it has to pay $300 million. USL was earlier in talks to get a strategic investor and also entered into exclusive negotiations with world’s largest spirits maker Diageo.


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KKR, Blackstone in Race for United Spirits Stake

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