BackUnited Spirits says independent directors approve Diageo deal
The firm is meeting its shareholders on 9 January seeking approval for the plan to make and sell brands owned by Diageo
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Mumbai: United Spirits Ltd, on Friday, said its independent directors have evaluated and approved a plan to make and sell Johnnie Walker whisky, Smirnoff vodka and other brands owned by its parent Diageo Plc, ahead of special meeting of shareholders on 9 January seeking shareholder approval for the plan.
In November 2014, minority shareholders of the company had rejected the proposal because it lacked details on how the benefits would be shared between Diageo and its local unit.
Touting the potential benefits of the deal, United Spirits said it estimates that the agreement will help generate roughly ₹ 700 crore in sales in the first year, if the deal is ratified by shareholders. United Spirits generates roughly ₹ 42 crore from distributing Diageo brands in India.
“...independent directors of the company at the relevant time, namely, Indu Shahani, Sudhakar Rao and D. Sivanandhan, have independently assessed the agreements and evaluated the transaction for its value accretive potential for the company before according their approval and recommending the resolution now placed before the shareholders for their approval by a special resolution in the ensuing extraordinary general meeting of the company to be held on 9 January," the company said in its filing to BSE.
United Spirits said the company had received queries from several shareholders about the assessment of such transaction by the independent directors.
Simply put, the company is indirectly endorsing the resolution with the help of independent directors, said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research Services Pvt. Ltd.
“The company cannot directly influence the shareholders hence it is soliciting the support through independent directors," he said.
About 29.8% of public shareholders of United Spirits voted against the resolution to allow the company to sell Diageo brands at a special meeting of shareholders on 28 November. The company needed the backing of 75% of shareholders for a related-party transaction. Shareholders also rejected nine related-party transactions between the company and its Indian promoter Vijay Mallya’s UB Group. Diageo and UB Group together own about 60% of United Spirits’ stock.
Diageo, the world’s largest distiller, owns roughly 54.78% of United Spirits after it bought an additional 26% of the company’s shares from public shareholders for £1.11 billion in July.
Shares of United Spirit ended at ₹ 2,811.90 on BSE, down 0.3% from previous close while India’s benchmark Sensex Index rose 1.4% to close at 27,887.90 points.
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