Diageo completes stake purchase in USL, gets only 25.02%
New Delhi: The world's largest spirits maker Diageo Plc Thursday said it has acquired 25.02 percent 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 percent stake between April 10-26 this year met with tepid response, Diageo said it is "the major shareholder in USL" after Thursday's completion of transaction.
Last year, Diageo had announced that it would pick up 53.4 percent stake in USL in a multi-structured deal for a total of Rs 11,166.5 crore. Instead, it now has 25.02 percent stake in USL for a total consideration of Rs 5,235.85 crore.
"Diageo has Thursday completed the acquisition of a further 14.98 percent stake in USL...The consideration was Rs 1,440 per share and the total consideration of Rs 3,134.56 crore has been settled Thursday," 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 percent 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 percent 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 Thursday. 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".
Diageo said certain lenders to USL have refused to release security that they hold over the 3,459,090 USL shares (representing approximately 2.38 percent of the enlarged share capital of USL) held by the USL Benefit Trust notwithstanding that they have been repaid in full.
"USL believes that this refusal is in clear breach of the applicable contractual arrangements. Accordingly, USL and the trustees of the USL Benefit Trust are taking steps to expedite release of the security to enable the balance of the sale under the Share Purchase Agreement to Diageo Bidco to take effect as soon as practicable," it said.
Diageo also announced new appointment which included that of Arun Gandhi, Sudhakar Rao, D Sivanandhan and Renu Kamad as independent directors, which are expected to be confirmed at the USL board meeting.
The company also said it has nominated Gilbert Ghostine, Ravi Rajagopal as a non-executive directors of USL, PA Murali as CFO and an executive director of USL.
Shares of USL closed at Rs 2,556.25, up 1.69 percent on the BSE Thursday.