Diageo completes stake purchase in USL, gets only 25%

The world's largest spirits maker Diageo Plc today said it has acquired 25.02% stake in Vijay Mallya-led United Spirits Ltd (USL) on completion of a share purchase deal announced last year, getting less than half of what it had originally planned.

Although its open offer to public shareholders of USL for an additional 26% stake between April 10-26 this year met with tepid response, Diageo said it is "the major shareholder in USL" after today's completion of transaction.

Last year, Diageo had announced that it would pick up 53.4% stake in USL in a multi-structured deal for a total of Rs 11,166.5 crore. Instead, it now has 25.02% stake in USL for a total consideration of Rs 5,235.85 crore.

"Diageo has today completed the acquisition of a further 14.98% stake in USL...The consideration was Rs 1,440 per share and the total consideration of Rs 3,134.56 crore has been settled today," Diageo Plc said in a statement.

On May 27, UK-based Diageo had subscribed for a preferential allotment of new shares in USL amounting to 10% of the post-issue enlarged share capital at a total consideration of Rs 2,092.71 crore.

Separately, Diageo had acquired 58,668 additional USL shares in the tender offer for a total consideration of Rs 8.57 crore.

"Diageo therefore now holds 36,359,192 shares representing 25.02% of the enlarged USL share capital at an aggregate cost of Rs 5,235.85 crore," the company said.

With completion of the share purchase agreement, the shareholders' agreement between Diageo, United Breweries (Holdings) Ltd and KFinvest is now effective, it added.

Commenting on the development, Diageo Chief Executive Ivan Menezes said: "Since we received approval for this transaction we have been getting ready for closing and integration. Having completed the share purchase, we will now begin the work to identify and capture the significant growth opportunities within this attractive market."

Menezes said that through this acquisition Diageo has transformed its position in India, a market which is one of the biggest growth opportunities in our industry.

"India will become one of Diageo's largest markets and with its increasing number of middle class consumers looking for premium and prestige local spirits brands as income levels rise it will also become a major contributor to our growth ambitions," he added.

Commenting on the development UB Group Chairman Vijay Mallya said: "I am very pleased that we have completed our share purchase agreement today. USL has entered into the next stage on its journey and I look forward to remaining part of that journey in my role as Chairman of USL".