Member Article

Diageo acquires 28% stake in Indian drinks firm

Drinks company Diageo has secured a 27.4% stake in Indian spirits firm United Spirits Limited (USL) for approximately £660m (INR 57,254).

The two businesses will work together to grow the USL company, as trends for premiumisation amongst Indian consumers increasingly grow.

The Chairman of USL, Dr Vijay Mallya, will retain his position following the completion of the acquisition announced on Friday, and work alongside Diageo.

Bangalore-based USL produces whiskey as its flagship product, after its parent company United Breweries established itself in 1856 to make beer in Southern India.

Diageo will take on 19.3% interest in the current share capital of USL for around £16.50 (INR 1440) per share from UBHL group, the USL benefit trust, SWEW Benefit Company, and two of the firms subsidiaries.

Shareholders of USL must also agree on the deal before it is officially confirmed, and Diageo has agreed to launch a Mandatory Tender Offer to USL’s public shareholders once the deal is secured.

A subsequent tender offer will be then be launched to acquire a maximum of 37,785,214 shares, equating to 26% of the enlarged share capital of USL.

The two companies agreed that the allotment and acquisition of shares from USL must strengthen the acquired firm financially, and reduce debt.

Dr Vijay Mallya, Chairman of the UB Group, 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.”

Chief Executive of Diageo, Paul S Walsh, commented: 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.

“USL’s number 1 position in local spirits together with our growing international spirits business of leading brands will enable us to grow across the consumer space as India’s increasing number of middle class consumers look to enjoy premium and prestige local spirits brands as income levels rise.”

This was posted in Bdaily's Members' News section by Miranda Dobson .