Diageo may remove put option from USL deal

Diageo may remove the put option clause from the its deal United Spirits, reports CNBC-TV18’s Kritika Saxena.

On the January 31, CNBC-TV18 reported that Securities and Exchange Board of India (Sebi) had released its final observation on Diageo-UB group deal. Sources indicated that Sebi had asked for some changes, specifically in the put option clause in the share purchases agreement. Diageo executives are in India currently as part of the United Kingdom (UK) Prime Minister’s delegation. Sources say that there has been an ongoing conversation between United Spirits Limited (USL) and Diageo. They are currently thinking over removing the put option clause. Essentially, there is a put option clause in the share purchase agreement, which allows Diageo to buy out United Breweries (UB) Group’s stake within a span of around seven years. Now, according to Sebi, this violates the takeover norms, considering this is a forward contract. Besides that, the market has been slightly edgy about the price of Rs 1,440 per share. Sebi hasn’t really asked for details on the pricing trajectory and hasn’t really asked for any major changes. The pricing may pretty much remain the same. Also, Diageo is looking to discuss the issues that KFA lenders have with the deal. CNBC-TV18 had earlier reported that lenders may not probably want to go ahead with the open offer issue and that could actually create hiccup in the deal. Diageo is looking to discussing this issue with lenders to understand their concerns to ensure that the open offer goes through or rather there is no hiccup in the open offer.