Kohlberg Kravis Roberts & Co, or KKR, has joined the race to pick up a minority stake in Vijay Mallya's United Spirits (USL), which is the world’s third-largest liquor marketer. The private equity biggie is looking to pick up USL’s treasury stocks, which amount to a 14.8%
stake in USL, reports Economic Times. Mallya has been in discussions with strategic players like Diageo and Bacardi for some time now, and is now also looking at financial investors.
The shares of USL reacted positively to this news, rising up by more than 6% reaching days high of Rs 751, against its yesterday's closing price of Rs 705. The 14.8% stake as per yesterday's closing price would be valued at Rs 1,045 crore (~$210 million), but Mallya would certainly seek a premium to current trading levels. The stocks 52 week high is Rs 1,873 per share.
A MNC player would be willing pay a premium factoring in the advantage of distributing its the distribution of its products in the Indian market, the world's largest beer market by volume.
The report adds that MNCs are willing to pay as much as Rs 1,400 per share. USL is also looking at issuing fresh shares, apart from selling treasury stocks.
Mallya is raising funds to pay off the Rs 6,900 crore debt on its 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.
KKR set up its India office earlier this year, hiring former Citigroup India honcho Sanjay Nayar. A significant minority in one of the worlds largest spirits maker with a 55% share in the fast growing Indian market may just be the grand start its looking for.
It has done couple of deals before setting up office in the country - the leveraged buyout of Aricent, and $250 million for a stake in Bharti Infratel, the telecom tower arm of Bharti Airtel.
PE Investments In The Space
Alcoholic beverages market are considered somewhat recession proof, with sales being affected only mildly. Private equity funds, who are now focusing on India's domestic consumption story, seem to be actively looking at deals in this space now. Private equity firm Wilbur Ross & Co is looking to acquire Cobra Beer brand or take a controlling interest in the beermaker’s Indian unit, as per reports. Standard Chartered Private Equity is also believed to be in the race.
There have been some investments in this space before in India. Lighthouse Funds has picked up a stake in Imperial Spirits and Sula Wineyards has raised funds from a bunch of PE investors including Indivision India Partners, the PE fund of Kishore Biyani's Future Capital Holdings.