Bengaluru/Mumbai: United Spirits Ltd will approach its shareholders again to seek approval for a plan to make and sell Johnnie Walker whisky, Smirnoff vodka and other brands owned by its parent Diageo Plc, after minority shareholders last month rejected the proposal because it lacked details on how the benefits would be shared between Diageo and its local unit.

Touting the potential 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.

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.

“...certain investors expressed their view to the management of the company that disclosure of the estimated monetary benefits that are likely to accrue to the company pursuant to the (proposed deal) would assist shareholders in better understanding the implications of the company entering into the agreement," United Spirits said in a filing to the BSE.

The company also said it would share marketing and advertising expenses with Diageo’s India unit, based on net sales. Diageo’s India unit is expected to shut down if the proposed deal goes through, according to several people familiar with the matter. They declined to be identified.

United Spirits’ shareholders will vote on the proposal at a special meeting on 9 January.

“United Spirits has disclosed additional details when they are re-presenting the proposal for shareholder vote. I do not see any reason why shareholders would want to stall this resolution," said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research Services Pvt. Ltd.

“However, it is to be noted that United Spirits has not put out the entire agreements, as part of the explanatory statements and the financial arrangements with the related parties are still hazy, while only the benefits are quantified. Additionally, the e-voting window is very short and overlaps a weekend, which is not in the interest of investors," he said.

At the November meeting, United Spirits 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.

United Spirits said on 20 October that it would seek shareholders’ approval to make, license and sell Diageo brands, including Smirnoff and Johnnie Walker in India. United Spirits has already been distributing Diageo India brands since October 2013 for a distribution fee.

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. As many as four United Spirits board members appointed by Diageo, all of whom are among the most experienced corporate professionals in India, have quit over the past eight months.

Soon after United Spirits finally reported its thrice-delayed fourth-quarter earnings in September, the company initiated an inquiry into its accounting practices as several cases of suspected financial impropriety surfaced. Despite being owed 1,337.4 crore by UB Group, United Spirits signed nine deals that will generate revenues or fees of more than 1,300 crore for companies controlled by the group over the next five years.

mihir.d@livemint.com

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