Bangalore/Mumbai: The Competition Commission of India will likely clear the majority stake acquisition by Diageo Plc in Vijay Mallya’s United Spirits Ltd, after representatives of the companies met government officials last week.
The approval by India’s fair-trade watchdog is the final regulatory clearance required by the companies to close the $2 billion deal following the conditional approval given by the markets regulator last week.
The commission has asked the companies to furnish a few more details about the proposed merger over the next few days, said an antitrust official, speaking on the condition of anonymity.
“Yes, we had a meeting last week. We’ve asked for more information. We will look at the deal on a priority basis,” the official said. “It’s most likely going to go through.”
The official declined to specify the details commission sought.
Two executives at Mallya’s UB group confirmed that antitrust officials had told them in the meeting last week that the deal would be cleared. The executives, who declined to be identified, said United Spirits and Diageo will file the additional information sought by commission by Friday and that the deal will close sometime in March.
The UB group declined to comment. Diageo did not respond to requests for comment.
The competition overseer had delayed the closure of the proposed deal, asking United Spirits and Diageo to submit more information than the companies had given in their initial application, Mint reported on 15 January. It had sought more details from the companies to ensure that the deal wouldn’t create a monopoly.
United Spirits, owner of brands such as McDowell’s No.1 and Bagpiper, controls half of India’s market of 250 million cases. One case is 12 bottles of 750 ml each.
London-based Diageo, maker of Johnnie Walker Scotch whisky and Smirnoff vodka, has largely failed to make a mark in India and lagged its global rival Pernod Ricard, which is the most profitable liquor company in the country.
The Securities and Exchange Board of India (Sebi) too initially held up the acquisition. Sebi finally approved the deal last week but asked the two companies to drop a key clause in the sale agreement.
The deal was announced in November when Diageo, the world’s largest liquor company, agreed to acquire 53.4% of United Spirits. It includes the purchase of a 27.4% stake in United Spirits by Diageo, including 19.3% from Mallya, for £660 million, as well as fresh equity from the firm. The British distiller would buy the remaining 26% from the public shareholders of United Spirits.
On Wednesday, the UB group executives cited above also said Diageo’s top management would meet their counterparts from United Spirits on 18 and 19 February in Goa. They said the meeting’s agenda included management realignment at United Spirits and an update on the Indian company’s financial and operational performance. As part of the agreement, Diageo has the right to appoint the chief executive and chief financial officer of United Spirits.
The deal will provide desperately-needed money to Mallya, possibly to infuse funds in his debt-loaded Kingfisher Airlines Ltd, which has been grounded since October.
Lenders on Tuesday said they would recall all loans given to the airline, starting the process for the recovery of Rs.7,000 crore in debt. Shyamal Acharya, deputy managing director (corporate) at State Bank of India, which has lent the most money to Kingfisher, said it will take a week or so to start the process.
Stocks of UB group companies fell on Wednesday, because if the bankers call in Kingfisher’s loans, the group’s other companies will also be affected.
Shares of United Breweries Holdings Ltd, the holding company of UB group, dropped the most on Wednesday, closing down 9.94% to Rs.70.25 on BSE. United Spirits shares fell 4.84% to Rs.1,862.45. Kingfisher Airlines shares declined 4.94% to Rs.10.58. Shares of United Breweries Ltd, maker of Kingfisher beer, dropped 9.26% to Rs.642.50. The benchmark Sensex gained 0.24% to 19,608.08 points.