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Home / Companies / People /  Vijay Mallya to get $40 million in first year as part of United Spirits exit deal

Bengaluru: In an announcement late on Thursday evening, UB Group chairman Vijay Mallya stepped down as non-executive chairman of United Spirits Ltd (USL), controlled by Diageo Plc, ending all association with the company.

In a conference call with reporters, Abanti Sankaranarayanan, business head of luxury and corporate relations of USL, reiterated Diageo’s stand on ending all association with Mallya, straddled under debt for a beleaguered Kingfisher Airlines Ltd. Diageo has promised Mallya a payout of $75 million over the next five years.

Sankaranarayanan added that the move “resolves the impasse at the board level since April 2015 when the USL board asked Mallya to step down as chairman, bringing certainty to the status of certain relevant agreements which were not approved by USL shareholders", and also eliminates the current contingent liabilities carried on the balance sheet of USL, or for that matter, any future liabilities that may arise.

Sankaranarayanan said this settlement closes a chapter for USL and opens a new one.

Edited excerpts from the call:

Does this imply that all charges against Mallya in association with misgiving as Diageo will be put to an end (in regard to financial irregularities Mallya may have been involved in while at United Spirits between 2010 and 2013)?

If you see the agreement with Mallya in totality, it delivers tangible and intangible benefits, and one of the elements of this is the release of claims. If you see it in its totality, the governance dispute that was there in the board ever since 2015 (April), it brings certainty to the status of relevant agreements, eliminates all current and future liabilities, protects USL’s business continuity with regards to banking relationships, and takes away the possibility of prolonged disputes and litigations.

What happens to certain assets (office properties, residences) owned by Mallya?

Those are assets which belong to USL and they will continue to do so. What we do have, as part of the agreement, is the fact that USL has entered into an auction agreement with one of the companies, an affiliate of Mallya’s. We are returning the assets to Mallya at an offer price, and by return we mean that we are in a position to sell these assets to Mallya at market value; he has the option to buy these.

So Diageo will pay $75 million to Mallya?

Yes, Diageo has agreed to pay Mallya $75 million in consideration of the five-year global non-compete, non-solicitation undertaking and also the fact that he has an undertaking that he will not buy any further shares in the company. It will pay $40 million in the first year.

What happens to Mallya’s (ownership rests at 3.76%) holding in USL?

Mallya has shareholding in the company, yes. It is best to direct these questions to him.

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