USL-Diageo open offer: Sebi seeks changes in agreement

The stock jumped up purely reacting to news that Sebi had possibly cleared the open offer, but Sebi has in a sense on January 31 released their final observations. Essentially when Diageo acquired a controlling stake in United Spirits, the deal was done in two parts, one was the preferential issue and one was the open offer.

Now the open offer has been pending. It was floated for last month but it had been delayed.

Sebi had its set of reservations and concerns as far as the open offer is concerned. It had concerns over the pricing, but the most important concern was related to the put option.

In a sense Sebi has said that since this is a forward contract this particular bit is not in compliance with the takeover norms.

Sources say  that JM Financial is currently reviewing this. JM Financial is the sole book runner for this open offer and it will be submitting their response. Diageo, ofcourse indicated that it is still awaiting the approval of Sebi. It is in the process of reviewing the report and that is on track for now.

The most important bit will be, understanding JM Financials response and Diageo’s response to this. More importantly understanding the revised timeline, the kind of open offer pricing that will come in and the pricing ofcourse has been the biggest bone of contention for market analysts, for several brokers that have been tracking the stock.