Nov 12, 2012, 10.10 PM IST
Dalal Street may not have been in much of a festive mood today. But if any stock had a firecracker of a day, it was, undoubtedly, United Spirits. In high spirits, thanks to the Diageo deal, USL closed up nearly 35 % at Rs 1,833 levels. Sunanda Jayaseelan reports.
It is a deal which has reportedly been in the making for close to six years now. But now Vijay Mallya has finally sealed the USL deal with Diageo for upwards of Rs 11,000 crore.
Here's a look at what analysts and brokerages are making of it. The verdict is mostly a thumbs up.
Both Morgan Stanley and CLSA upgraded the stock to buy. CLSA says that Diageo is excited about USL's market distribution strategy. USL has over 40 percent of the spirits market in India with 22 brands selling over a million cases each.
Religare, on its part, says that Diageo would focus on premiumisation of USL's brands. At the moment, over 20% of USL's products bring in close to 50% of its revenues.
JP Morgan, while calling this deal transformational, attributes it to the deal’s ability to reduce USL's debt and in exploiting synergies between the two companies
However, JP Morgan is quick to caution investors that they will not get to benefit from Diageo's international portfolio of products just yet. Since diageo has said that it intends to run both businesses separately initially.
While the deal could take some time to close as regulatory approvals are still pending, one concern is USL's stake in Whyte and Mackay which it bought in 2007.
Nomura says that if UK regulatory authorities raise concerns over monopoly in the market post this deal with Diageo, then USL could have to look at whether or not to dispose of its Whyte & Mackay stake, either partly or wholly.
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