Diageo acquires additional 1.4% stake in United Spirits for 4.7B Indian rupees, bringing its total stake in company to 26.4%

Nevin Barich

Nevin Barich

Dec 3, 2013 – Times of India

BANGALORE, India , December 3, 2013 () – British drinks giant Diageo on Tuesday picked up an additional 19.67-lakh shares or roughly 1.35% stake in United Spirits Limited (USL) from the open market for Rs 472 crore. This raises its overall shareholding in the Bangalore based company to 26.37%. London and New York listed Diageo was in the market to mop up a big chunk of the 39 lakh USL shares (worth Rs 943 crore) offloaded by Morgan Stanley Asia Pte. It came on a day when USL shares fell almost 8% in morning trade after the Office of Fair Trading in UK raised competition concerns prompting Diageo to consider divesting Whyte & Mackay, a 100% subsidiary of the Indian company. Analysts view the transaction as part of Diageo's 'creeping acquisition' strategy to slowing increase its stake in India's largest spirits manufacturer USL after it's Rs 5,500 crore open offer met with a tepid response earlier this year. Diageo had 25.02% stake with management rights in India's largest distiller. Last year, Diageo had announced that it would pick up 53.4% stake in USL in a multi-structured deal for a total consideration of close to $2 billion or roughly Rs 11,166 crore. SEBI's regulations allow Diageo to buy up to 5% shares annually in USL from the open market, which the UK company is likely to employ. As per information available with the bourses, Relay BV, a wholly owned subsidiary of Diageo, purchased 19,67,940 USL shares at Rs 2,400 apiece. The open market transaction saw Diageo pay a 66% premium on the USL shares over what it paid last year of Rs 1,440 a share. USL shares closed at Rs 2581, down 1.52%, in Mumbai trade on Tuesday. The stock has more than doubled in the past 12 months since Diageo clinched a takeover deal. There's also speculation that Diageo may revisit open offer plans after a mandatory cooling off period. Diageo is not in a hurry to go past 51% in the USL but would prefer to do so within 36 months, a timeframe in which erstwhile controlling shareholder Vijay Mallya has agreed to vote along with the foreign partner on all board decisions. Mallya, who remains USL chairman, holds a little over 11% in the company.

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