Diageo may end up with a smaller stake in Vijay Mallya's United Spirits
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Vijay Mallya's high-profile stake sale in
United Spirits Ltd (USPL) to Diageo suffered a setback on Friday with the Karnataka High Court annulling it in response to a winding-up petition by the creditors of the holding company United Breweries (Holdings) Ltd or UBHL.
The development comes nearly five months after Diageo completed the transaction, acquiring a majority stake in USL.
Friday's order has annulled the 6.97% stake sold by UBHL to Diageo as it had given a corporate guarantee to the creditors of Kingfisher Airlines. The fate of these shares would now be decided once the court disposes of the winding-up petitions against UBHL.
Diageo, which owns premium liquor brands like Johnnie Walker Scotch whisky and Smirnoff vodka, had become the single largest shareholder in USL, having spent around Rs 5,707 crore to acquire the 26.37% stake it currently holds.
In November 2012 Diageo had agreed to acquire a 27.4% stake in USL for Rs 5,725 crore by paying Rs 1,440 per share. Of this 27.4%, 19.3% was by acquiring a direct stake from UBHL and some USL subsidiaries and group trusts. The balance was to come through a preferential allotment by USL shareholders to Diageo at Rs 1,440 per share of new shares amounting to 10% of the post-issue enlarged share capital of USL.
For the balance 26% stake, Diageo made the mandatory open at R1,440 per share but could muster only 0.04% stake taking its stake to 25.02%. In November, through a block deal it acquired an additional 1.35%, taking its stake to 26.37%. With the HC setting aside the sale made by UBHL, Diageo's stake drops to 19.4%. UBHL and related promoters currently hold 11.08% in USL.
While setting aside UBHL's share sale to Diageo, the division bench of the HC set aside the May 24 order of the single-judge company court bench that had granted UBHL permission to sell the shares on the condition that it deposited Rs 250 crore in the court. This was because the company was facing several winding-up petitions filed by creditors of Kingfisher Airlines, claiming to have corporate guarantees. Apart from the Rs 250 crore already deposited, the bench also ordered that Rs 379 crore, the sum remaining from UBHL's receipts of Rs 1,460.37 crore from its share sale, be deposited in the court. The disbursal of the amounts will be decided by the court after disposal of the petitions, it said.