Diageo set to take over Mallya’s United Spirits in Rs 11,166-cr deal

Diageo

Banks which have given a loan of Rs 7,000 crore to Kingfisher are now hopeful of a comeback by the airline and recovery of their dues. "From the perspective of money coming to the promoters and the holding company, it augurs well for the airline. There can only be an upside for the airline from here on. Kingfisher needs capital and where the money comes from, we are completely agnostic," SBI chairman Pratip Chaudhuri said.

In the two-layered deal that will give the world's biggest spirits group a larger slice of the fast-growing India market, Diageo will acquire a 19.3 per cent stake in USL at a price of Rs 1,440 per share from the UBHL group, the USL Benefit Trust, Palmer Investment Group Limited and UB Sports Management (two subsidiaries of USL) and SWEW Benefit Company (a company established for the benefit of certain USL employees). Following this disposal, the UBHL group would continue to have a shareholding in USL amounting to 14.9 per cent of current share capital.

The shareholders of USL will then be asked to approve the preferential allotment to Diageo at a price of Rs 1,440 per share of new shares amounting to 10 per cent of the post-issue enlarged share capital of USL.

Diageo and Mallya have entered into a memorandum of understanding under which they will form a 50:50 joint venture which will own United National Breweries' traditional sorghum beer business in South Africa. Diageo's investment for its 50 per cent interest in the joint venture is expected to be approximately $ 36 million, subject to adjustment. Diageo and Mallya are also considering the possibility of extending this joint venture in order to maximise opportunities which exist in certain emerging markets in Africa and Asia (excluding India).

Paul S Walsh, chief executive of Diageo, said: "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."

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