The deal was done at a slight premium to Tuesday's closing share price, and at a close to record high for the stock, which shows Heineken's eagerness to do the deal
On Wednesday morning, a large block deal in United Breweries Ltd (UBL) was done at a price of ₹1,471.25 per share. The company later said that its promoter, Heineken N.V., acquired the 39.6 million shares that changed hands. With this deal, Heineken has increased its stake in United Breweries from 46.5% to 61.5%.
Analysts say the deal shows Heineken’s confidence in UBL and simultaneously, in the Indian beer market. The deal was done at a slight premium to Tuesday’s closing share price, and at close to record high for the stock, which shows Heineken’s eagerness to do the deal.
Note that when a seller initiates a large block trade, the shares are typically sold at a discount of roughly 5-7%. Heineken acquired the shares from the Debt Recovery Tribunal (DRT), which is trying to recover dues from the Vijay Mallya Group, the erstwhile majority shareholder in the company.
Analysts from Emkay Global Financial Services Ltd said in a report on 23 June, “The higher stake may result in greater involvement and support from Heineken. However, United Breweries is an efficiently run company with access to Heineken’s global portfolio. Hence, we don’t see any material benefits immediately."
Market regulator Securities and Exchange Board of India (Sebi) has exempted Heineken, a promoter entity, from making an open offer to UBL shareholders as a result of the 15% stake purchase.
Meanwhile, UBL’s FY21 results have been severely impacted by the pandemic. Revenue fell 35% year-on-year to ₹4,241 crore. Unfortunately, for investors, the second covid wave will cast its dark shadow on the June quarter performance as well.
Even so, the recovery is anticipated to be sooner this time around.
“We see a faster recovery than the first lockdown given benign taxation, earlier reopening of on-premise and ongoing vaccination," said Emkay’s analysts.
Shares of United Breweries hit a new 52-week high on the National Stock Exchange (NSE) on Wednesday in early deals and gave up some of the gains later on. The stock trades at around 50 times estimated earnings for financial year 2023, based on Bloomberg. Higher valuations may limit sharp upsides from a near-term perspective.