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India’s United Spirits may up stake offer to Diageo

India’s United Spirits may up stake offer to Diageo
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First Published: Fri, Feb 13 2009. 02 25 PM IST
Updated: Fri, Feb 13 2009. 02 25 PM IST
New Delhi: Indian liquor maker United Spirits said on Friday it was prepared to offer a stake of more than 15% and board representation to Diageo Plc to ensure a successful conclusion to talks that began in 2008.
Diageo, the world’s largest alcoholic drinks group, said there was no certainty of a deal with United Spirits, the world’s third-largest spirits maker by volume.
United Spirits chairman Vijay Mallya said while he had intended to offer Diageo a stake of less than 15%, using shares that United had bought back and was holding on its books, he was willing to offer more if Diageo wanted.
“Absolutely... I have already done it with United Breweries. I brought in Scottish & Newcastle and they made a public offer. I have already done it before and I don’t see why I should have a problem with that now,” Mallya told CNBC TV18.
He also said that if Diageo wanted board representation then he would not stand in the way.
Under Indian law, the purchase of a 15% stake triggers a mandatory open offer for a further 20% of the company.
“Diageo can confirm it is reviewing a possible collaboration with United Spirits. However there is no certainty at this stage that these discussions will result in a transaction,” a spokeswoman for Diageo in India said.
Media reports have said United Spirits, which has a market value of about $1.4 billion, would use proceeds from the stake sale to reduce debt of $1.2 billion from its purchase of Scottish spirits maker Whyte & Mackay in 2007.
Mallya said United would also push ahead with plans to sell 49% in Whyte & Mackay, which was part of the discussions with Diageo.
“So, yes, with or without Diageo, that is something that is very much on my agenda because I have confirmed that in six months I will deleverage United Spirits, and it is certainly one of the options before me,” Mallya said.
Diageo isn’t yet ready to sign a deal with United Spirits
Vijay Mallya’s stake sale of up to 14.9% in United Spirits to the world’s largest liquor maker, Diageo, seems to have got stuck with the chief executive of the latter saying that his company is not ready to sign a deal at the moment.
“Diageo Plc isn’t yet ready to sign a deal with United Spirits Ltd (USL) in India,” Diageo chief executive Paul Walsh said.
Mallya in January had said that the UB Group was open to selling up to 14.9% of its treasury stocks in USL to a strategic partner and in that regard he had met Diageo officials in New York.
Mallya on Friday said, “Both Diageo and United Spirits are public companies and cannot possibly be expected to comment on a potential transaction in definitive terms till negotiations are totally conclusive in all aspects”.
However, both Diageo and United Spirits would not invest the considerable time and money together with advisers to engage in negotiations if there was no intent to work towards a transaction, he added.
United Spirits portfolio comprises over 150 products including brands such as Black Dog, Signature, Royal Challenge and Romanov.
Diageo markets brands such as Johnnie Walker Black & Red Label, Smirnoff, Balleys and Guinness in India from its international portfolio.
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First Published: Fri, Feb 13 2009. 02 25 PM IST