$2 bn deal: Diageo gets control over Mallya’s United Spirits

FP

Diageo Plc., the world's biggest spirits group, will buy a majority stake in Vijay Mallya's United Spirits Ltd for $2.1 billion (Rs 11,166 crore). The deal will open an opportunity for Mallya to pump funds into his cash-strapped Kingfisher Airlines.

However, after the deal was announced, Mallya said: "Each individual company is a public entity. So the Kingfisher Airlines issue will be resolved by Kingfisher Airlines and UB Holdings."

This will be the biggest deal involving an Indian firm since British oil firm Cairn Energy Plc sold a majority stake in its India operations to Vedanta Resources Plc last year.

Diageo, maker of Johnnie Walker, Guinness and Smirnoff , will initially acquire a 27.4 per cent stake from United Spirits, which produces Bagpiper and McDowell's No.1. United Spirits will issue new shares priced at Rs 1,440 each which will be subscribed to by Diageo — a premium of around 7 per cent to the closing price of the stock on Thursday.

Diageo will then launch a mandatory open offer for an additional 26 per cent from public shareholders at the same price, giving it a majority stake of 53.4 per cent in United Spirits, Diageo said in a statement.

The share prices of all the Mallya group companies rose after the deal was announced. Kingfisher Airlines, which could lose its aviation permits soon, rose the highest at 4.7 per cent, while United Spirits ended 1.3 per cent higher and United Breweries Holdings Ltd rose 3.3 per cent. Under the terms of the deal, Mallya will remain chairman of United Spirits.

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