Karnataka High Court annuls United Spirits sale to Diageo

MUMBAI Fri Dec 20, 2013 11:05pm IST

Kingfisher Airlines Chairman Vijay Mallya (C) leaves after his meeting with Director General of Civil Aviation E.K. Bharat Bhushan in New Delhi March 20, 2012. REUTERS/Parivartan Sharma/Files

Kingfisher Airlines Chairman Vijay Mallya (C) leaves after his meeting with Director General of Civil Aviation E.K. Bharat Bhushan in New Delhi March 20, 2012.

Credit: Reuters/Parivartan Sharma/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - A regional court on Friday ordered the annulment of the sale of United Spirits (UNSP.NS) to British spirits group Diageo (DGE.L), dealing a further blow to a transaction beset by complications, though Diageo said it would appeal the decision.

Diageo said the Karnataka High Court had ordered the cancellation of the sale in response to a petition by creditors of United Breweries Holdings Ltd, which sold its stake in United Spirits to the British firm through a complicated share transaction.

These creditors pursued a legal case in Karnataka seeking to force the sale of United Breweries Holdings, expecting the proceeds could be used to settle their claims.

The ruling from Karnataka High Court was not available, making it hard to discern its wider impact.

Diageo said in a statement it would appeal against the decision once it received it from the court.

The ruling adds another complication to Diageo's attempt to increase its foothold in India's growing spirits market, but analysts doubted whether it would torpedo the deal given the prospect of appeals, including to the Supreme Court, and previous approvals by regulatory authorities.

"This court order can cause only minor hiccups in the deal," said Deven Choksey, managing director at K R Choksey Securities.

Diageo completed its takeover of United Spirits in July, almost eight months after the companies announced the deal because of legal and regulatory difficulties.

At the heart of these difficulties is bankrupt Kingfisher Airlines (KING.NS), part of the wider UB Group controlled by liquor baron Vijay Mallya, an executive known as "the king of good times."

Mallya's UB Group is the owner of United Brewery Holdings and previously owned United Spirits.

Kingfisher grounded operations owing 60 billion rupees to creditors as of September. United Breweries Holdings was guarantor for some of these loans, and creditors of the bankrupt airline have since sought to recover the loans by trying to stop the Diageo deal.

The claims from creditors attracted close scrutiny from the Competition Commission of India and capital market regulator Securities and Exchange Board of India, before both eventually approved the sale.

A spokesman for UB Group also confirmed the Karnataka court ruling and added it would also consider an appeal to the Supreme Court.

(Editing by Rafael Nam; Editing by Mark Potter)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Economic Pulse

REUTERS SHOWCASE

Political Pulse

Political Pulse

100 days of Modi: Good for business, not so good for marginalised groups.  Full Article 

Segway in India

Segway in India

Segway’s India business pegs hope on tech-savvy Modi  Full Article 

Best Economy

Best Economy

Swiss economy most competitive once again; EU, U.S., Japan improve.  Full Article 

Power Outage

Power Outage

Mumbai hit by power cuts  Full Article 

Commodities

Commodities

Gold imports, premiums to jump on festive demand - top refiner  Full Article 

Economic Worries

Economic Worries

Pakistan's promises to IMF in doubt as protests sap economy   Full Article 

Islamic Finance

Islamic Finance

Basel III deposit challenge looms over Islamic banks   Full Article 

Antitrust Probes

Antitrust Probes

U.S. business lobby says concerned China antitrust probes unfair.  Full Article 

Reuters India Mobile

Reuters India Mobile

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