Diageo brings United Spirits into its balance sheet fold

Diageo acquired an additional 26% in USL taking its total stake to 54.78%

Starting Wednesday, London-headquartered spirits company Diageo is consolidating the numbers of United Spirits Ltd (USL) into its global balance sheet. This follows Diageo confirming it had acquired an additional 26 per cent in USL, raising its stake to 54.78 per cent.

For its stake in USL, Diageo has forked out Rs 18,023 crore.

In a statement on Wednesday, Diageo said through its wholly-owned subsidiary Relay BV, it had accepted the tender of 37,785,214 USL shares at Rs 3,030 a share under the offer announced on April 15.

The shares accepted by Diageo are being transferred to Relay BV; these represent 26 per cent of USL's issued share capital. The aggregate consideration for these shares is Rs 11,448 crore.

Ivan Menezes, chief executive of Diageo, said: "Our announcement on Wednesday is significant for Diageo. India has now become one of Diageo's largest markets and will be a major contributor to our growth ambitions. USL is the leading player in the attractive Indian spirits market with great brands. We can now combine that strong platform with Diageo's strengths to create a compelling future in India for Diageo, USL and the Indian spirits sector."

Diageo's move culminates a transaction announced in November 2012, when it had said it was planning to acquire at least 51 per cent in USL. The move to acquire control over USL is part of Diageo's emerging markets push. The company hopes to derive at least 10 per cent of its global sales from India soon.

But Diageo will have to wait for a Supreme Court order set for September, when the status of its 6.8 per cent stake in USL will be decided. Diageo, with United Breweries (UB) Holdings, had moved the court early this year, after the Karnataka High Court had annulled a share sale pact of 6.8 per cent stake in USL by UB Holdings to Diageo, on a plea by a group of unsecured creditors to UB Holdings.

On Wednesday, the USL stock closed at Rs 2,473 on the National Stock Exchange, up 2.3 per cent on the previous close.