Diageo buys 10% stake in United Spirit for Rs 2,092 crore

UK-based spirits giant Diageo on Monday acquired 10 per cent stake for Rs 2,092 crore in liquor company United Spirits (USL) through a preferential allotment of shares by USL.

USL said it approved the allotment of 1.45 crore equity shares at Rs 1,440 per USL share to Relay BV, a subsidiary of Diageo, as part of the Rs 11,166-crore deal struck last November to acquire a 53.4 per cent stake in USL.

Following the development, USL’s stock touched a 52-week high of Rs 2,605 on Monday, but closed at Rs 2,513.55, down 2.18 per cent from its previous close on Friday. Diageo eventually plans to acquire 53.4 per cent of USL. However, its open offer to acquire 26 per cent stake in USL last month got a lukewarm response when shareholders tendered only 58,668 shares as against Diageo’s offer to buy 3.8 crore shares at a price of Rs 1,440 per share, translating into a meagre 0.4 per cent stake.

A USL spokesperson said on Monday that the Karnataka High Court's ruling last week cleared the decks for the share transfer to Diageo. He declined to comment on information over whether another preferential allotment is planned next month.

Last week, the Karnataka High Court had given a conditional go-ahead to United Breweries Holdings Ltd (UBHL) to sell about 1.3 crore shares of USL to Diageo as part of the deal. The court's nod was in response to an application filed by UBHL during the course of a petition to wind up UBHL by BNP Paribas and Avions de Transport Regional GTE, among others (aircraft lessors and financiers), after failing to recover dues payable by Kingfisher Airlines, for which UBHL stood as guarantee. 

The court restrained UBHL from pledging, mortgaging, selling or encumbering all of its moveable and immoveable properties until further orders. UBHL was also directed to deposit Rs 250 crore on completion of the sale to show its (UBHL's) bonafides to pay the petitioners.