Diageo has finally agreed a deal with United Spirits

Diageo has finally agreed a deal with United Spirits

Diageo has agreed a deal to acquire a 53.4% controlling stake in United Spirits for INR111.7bn (US$2.05bn), the companies said today. 

Under the long-awaited deal, Diageo will take a 27.4% share in United Spirits for INR57.25bn (US$1.05bn). It will then be obliged to launch a mandatory tender offer to the Indian group's shareholders, representing another 26% of the company.

Diageo would then hold a controlling 53.4% stake in United Spirits. 

Vijay Mallya will continue as the group's chairman and “work with Diageo to build the USL business as the current consumer trends for premiumisation accelerate in India”, the companies said. 

The announcement brings to an end a long period of media speculation over the deal. Previous talks between the two broke down three years ago due to a disagreement over value. 

Paul Walsh, Diageo's chief executive, said today he was “delighted” his company has the opportunity to “be part of India’s large and growing local spirits market”. 

He added: “As a result of the agreements we are announcing today we will be well positioned to take the growth opportunities presented by a spirits market where growth is driven by the increasing number of middle-class consumers.” 

Mallya said: “'I am very proud of USL and what has been created over the last 30 years to bring this company to its pre-eminent position in India. 

“I have had a long association with Diageo and therefore I am confident that this winning partnership with Diageo provides USL with the best possible platform for future growth. I am delighted to remain part of that journey as chairman of USL as we work together to build continued value for the shareholders of USL and UBHL.” 

The deal remains subject to regulatory approval, but is expected to complete in the first calendar quarter of 2013.