After months of speculation, global spirits major Diageo, and Vijay Mallya-owned United Breweries Holdings and United Spirits on Friday announced agreements under which Diageo would acquire a majority stake in United Spirits.
Diageo would initially acquire 27.4 percent stake in United Spirits for Rs 1,440 a share. The total consideration would be around Rs 5,725.4 crore. The agreement is in two parts -
Diageo will acquire 19.3 percent at Rs 1,440 a share from United Breweries Holdings Group, USL Benefits Trust, United Spirits' two subsidiaries - Palmer Investment Group and UB Sports Management and SWEW Benefit Company (established for benefit of certain United Spirits employees). Post this, UB Holdings will continue to hold 14.9 percent of United Spirits' current share capital.
Further, United Spirits' shareholders will have to approve a preferential allotment of new shares amounting to 10 percent of the post-issue enlarged share capital of United Spirits to Diageo at Rs 1,440 a share.
These agreements would then trigger an obligation on Diageo to launch an open offer for the public shareholders of United Spirits. Diageo said this tender offer to acquire a maximum of 3,77,85,214 shares, equating to 26 percent of the enlarged share capital of United Spirits, will also be at Rs 1,440 a share.
United Spirits closed at Rs 1,360.50, up 1.3 percent at Rs 1,360.50 on NSE.
On completion of the share purchases and if the tender offer is fully subscribed then Diageo will hold 53.4 percent stake in United Spirits at an aggregate cost of Rs 11,166.5 crore, the companies said.
Also, Diageo and Vijay Mallya have entered into a memorandum of understanding to form a 50-50 joint venture, which will own United National Breweries' traditional sorghum beer business in South Africa.
Diageo's investment in this 50-50 joint venture is expected to be about USD 36 million.
The two companies are also considering the possibility of extending this beer JV to maximise opportunities in certain emerging markets in Africa and Asia (excluding India).