Diageo advances USL open offer

The open offer by Diageo, the global spirits major, for a further 26 per cent stake in United Spirits (USL) is being advanced by almost a week. This is on a directive from the equity markets regulator, Securities & Exchange Board of India (Sebi).

Diageo has said its second open offer will open on June 6, as against the earlier June 11. The offer will close on June 19 (earlier June 24).

Market experts said Sebi directing an acquirer to advance an open offer was not uncommon. It is usually done to avoid price manipulation in the secondary market.

Diageo currently has close to 29 per cent in USL, which it bought for Rs 6,500 crore. It is launching this second open offer for an additional 26 per cent stake for Rs 11,500 crore, at Rs 3,030 a share.

The USL stock has been trading at Rs 2,700-2,800 a share in the past month. Analysts say the stock is expected to be in that range or drop further. They recommend shareholders have a favourable view on the open offer and tender their shares.

The open offer, which was made last month, has been now cleared by Sebi, according to a public notification. Sebi issued final observations, necessary for the offer and the deal as a whole to go through, on May 21.

The global liquor giant would pay Rs 3,030 a share of USL, which is more than double the price of Rs 1,440 per share it offered in the previous bid last year.

The offer for 3,77,85,214 USL shares, being made through Relay BV, a wholly owned indirect subsidiary of Diageo, is another attempt by the company to increase its stake beyond 50 per cent in the flagship firm of the UB Group.

If the offer is fully subscribed, Relay will hold 54.78 per cent of USL’s issued share capital and will have paid about Rs 18,023.14 crore for its total shareholding in USL. Relay currently holds 28.78 per cent of USL’s issued share capital, acquired for Rs 6,574.22 crore.

Diageo had announced in 2012 it would pick up a 53.4 per cent stake in USL in a multi-structured deal for a total of Rs 11,166.5 crore.
DEAL DETAILS

• This is the second open offer made by Diageo to gain majority control in the liquor firm
• Diageo would pay Rs 3,030 a share of USL, which is more than double the price of Rs 1,440 per share it offered in the previous bid
• Diageo, which sells brands such as Smirnoff vodka and Johnnie Walker whiskey, had announced in 2012 it would pick up a 53.4 per cent stake in USL in a multi-structured deal