INDIA/UK: Diageo takes control of United Spirits with further stake buy

By | 4 July 2013

Diageo is now the major shareholder in United Spirits

Diageo is now the major shareholder in United Spirits

Diageo has completed the latest round of its United Spirits purchase, and is now the major shareholder in the Indian firm.

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.

Expert analysis

The Future of the Spirits Market in India to 2017

Synopsis • The Future of the Spirits Market in India to 2017 is the result of Canadean’s extensive market research covering the Spirits market in India. • The report presents detailed data on the Spirits consumption trends in India, historic and forecast consumption volume and value at market and category level, brand share, alcoholic strength, price segmentation data, and distribution channel data. • This report brings together Canadean Intelligence's research, modelling and analysis expertise in order to develop uniquely detailed market data. This allows domestic and foreign companies to identify the market dynamics to account for the Spirits sales overall and to know which categories and segments are in the ascendency in the coming years. Summary • This report provides authoritative and granular detail of the Spirits market in India; and in doing so fills the gaps in marketers’ understanding of market trends and the components of change causing them. • Based upon extensive secondary research, this report provides comprehensive and granular insights that allows marketers to confidently update their strategic and tactical plans. Scope Detailed category coverage is provided, covering eight product segments that include: Brandy, Gin & Genever, Liqueurs, Rum, Speciality Spirits, Tequila & Mezcal, Vodka, Whiskey. Detailed product sales segmentation for volumes is provided, including brand data (2009-12), sales by alcoholic strength (2009-12), sales by price segmentation (2009-12), and sales by distribution channel (2009-12), at the product category level. Future forecasts allow marketers to understand the future pattern of market trends; from winners and losers to category dynamics and thereby quickly and easily indentify the key areas in which they want to compete in the future. Reasons To Buy The report provides a unique mix of highly granular market data, based upon detailed industry research, in order to offer a detailed insight into the trends and dynamic

Sectors: Mergers & acquisitions, Spirits

Companies: Diageo, United Spirits, UB Group

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