Diageo said to weigh raising stake in United Spirits after Vijay Mallya’s exit
Mumbai, London: Diageo Plc, the maker of Johnnie Walker scotch and Smirnoff vodka, is considering increasing its majority stake in Indian whiskey producer United Spirits Ltd., people familiar with the matter said.
Diageo is weighing an open offer to the other shareholders in India’s biggest spirits maker, according to the people, who asked not to be identified because the information is private. Diageo has a 55% stake in United Spirits, which has a market value of about $4.5 billion, according to data compiled by Bloomberg. No final decisions have been made and the company may decide against buying more shares, they said.
The British company has been considering an increased stake for several months, the people said. The decline in United Spirits shares, which have fallen 22% in the last 12 months, has made such a move more attractive now, one of the people said.
A representative for United Spirits directed questions to Diageo. Diageo declined to comment.
Under Indian stock market regulations, Diageo could raise its stake to just under 75% without triggering a delisting offer. The current value of a 20% stake in United Spirits is about $900 million.
United Spirits shares rose 6.5% to close at Rs2,085.15 in Mumbai on Tuesday. Diageo fell 2.8% to 2,134.50 pence at 1:51pm in London.
The UK distiller agreed to acquire a stake in United Spirits, the maker of McDowell’s No. 1 whiskey and Romanov vodka, in 2012. It bought a further 26% stake through an open offer in 2014 for Rs3,030 a share raising its holding to 54.8%.
The parent company had been at odds with United Spirits’s former chairman Vijay Mallya, asking the Indian businessman to resign in 2015 after an internal investigation found that company funds were diverted to other entities under his control. Mallya initially refused to quit, denying any wrongdoing. The two sides reached an agreement last year that paid the executive $75 million not to compete or interfere with the company for five years, and he resigned with immediate effect in February.