Diageo close to deal for United Spirits stake

MUMBAI Thu Nov 8, 2012 11:44pm IST

1 of 3. A child sleeps at a shop selling whisky in Hanoi June 6, 2012.

Credit: Reuters/Kham/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - Diageo Plc (DGE.L) was close to a deal for a stake in liquor baron Vijay Mallya's United Spirits Ltd (UNSP.NS) after months of talks, sources with direct knowledge of the matter said, with a deal likely to be announced as soon as Friday.

Diageo and United Spirits, which has a market value of $3.2 billion, were expected to sign a deal term sheet soon, the sources said, declining to be named because they were not authorised to speak to the media.

The two companies said in September that they were in talks about a possible deal.

Diageo is likely to end up with a 51 percent stake in United Spirits through a combination of share purchase from the owners of the Indian company, buying new shares and launching a mandatory open offer to minority shareholders, sources said.

Other terms, including the deal value, were not immediately available and both companies declined to comment.

Diageo, the world's biggest spirits group and maker of brands including Johnnie Walker whisky, Guinness beer and Smirnoff vodka, has long coveted an expanded presence in India. In 2008 the two sides held talks that collapsed the next year.

The deal would ramp up Diageo's presence in the world's largest whisky market, while Mallya will gain much-needed cash to reduce United's debt. It could also free up funds to revive his grounded Kingfisher Airlines (KING.NS).

At the end of June United Spirits' gross debt stood at $1.6 billion.

Mallya has been scrambling for nearly a year to raise funds for Kingfisher Airlines, prompting speculation that he may offload a stake in United Spirits, India's dominant spirits maker, or United Breweries (UBBW.NS), the maker of Kingfisher beer.

The airline, which has struggled to pay its staff for most of the year and has not flown for more than a month because of protests and safety concerns, posted a record loss on Thursday but said that a recovery plan was in the works.

Shares in United Spirits have nearly tripled this year, with much of the gains coming in the past four months amid market talk about a possible deal with Diageo. The Mint newspaper said on Tuesday that a deal is likely to be announced this week.

The shares rose 3.4 percent on Thursday, while the benchmark Mumbai market index .BSESN ended down 0.3 percent. (Reporting by Sumeet Chatterjee and Indulal P.M.; Additional reporting by Anjuli Davies in London; Editing by David Goodman)

FILED UNDER:
  • Most Popular
  • Most Shared

Insight

REUTERS SHOWCASE

Investing in India ETFs

Investing in India ETFs

U.S. investors elevate India over other emerging markets  Full Article 

Border Talks

Border Talks

India names Ajit Doval as special envoy for China border talks.  Full Article 

WTO Deal

WTO Deal

U.S. seeks to step up India trade talks  Full Article 

Phone Masts

Phone Masts

American Tower to buy Bharti Nigeria phone masts for $1.1 billion  Full Article 

Infrastructure Plan

Infrastructure Plan

India targets private cash to build railways to its ports.  Full Article 

Shadow Banking

Shadow Banking

Reserve Bank planning more measures for NBFCs.  Full Article 

Parliament Session

Parliament Session

Congress signals it could back Modi's insurance reform plan  Full Article 

SpiceJet Investors

SpiceJet Investors

SpiceJet says in early talks with investors for fresh capital  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage