INDIA/UK: Diageo takes control of United Spirits with further stake buy
Diageo is now the major shareholder in United Spirits
The company confirmed today (4 July) that its share purchase agreement with United Spirits' parent company, The UB Group, has closed. Subsequently, Diageo has added a further 14.98% stake in United Spirits to the 14.5m shares it bought in May, and the 58,668 shares it acquired in its mandatory tender offer (MTO), also in May.
Diageo now owns 25.02% of United Spirits and is the unit's largest shareholder. Today's transaction has cost Diageo INR31.35bn (US$521.6m), which, on top of the INR20.9bn paid for the initial stake in May, and the INR85.8m spent in the MTO, means that the company has spent INR52.36bn (US$871.2m) on USL.
Although the company's holding is below the 27.4% stake it initially intended to own, Diageo will still have control of United Spirits and has nominated its head of global business development, Ravi Rajagopal, as a non-executive director of USL. Rajagopal joins Diageo's Asia-Pacific president, Gilbert Ghostine, on the board.
Diageo is still waiting on about 3.5m shares – around 2.4% of USL – that it had expected to acquire. The shares are being held by “certain lenders to USL” who are “refusing to release (their) security”, Diageo said. These lenders have been repaid, Diageo noted.
“USL believes that this refusal is in clear breach of the applicable contractual arrangements,” the company said. “Accordingly, USL … (is) taking steps to expedite release of the security to enable the balance of the sale … to take effect as soon as practicable.”
“Since we received approval for this transaction we have been getting ready for closing and integration,” said Diageo's new CEO, Ivan Menezes. “Having completed the share purchase, we will now begin the work to identify and capture the significant growth opportunities within this attractive market.’
The chairman of UB Group, Dr Vijay Mallya, added: “USL has entered into the next stage on its journey and I look forward to remaining part of that journey in my role as chairman of USL.”
The UB Group has subsequently seen its stake in USL fall to 11.08%.
United Spirits' results will begin to appear in Diageo's numbers from the beginning of next year.
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