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Mallya readies platform for 10% preferential allotment to Diageo – Whyte & Mackay future still up in the air

May 19, 2013

Nearly six months after signing a landmark deal with Diageo, liquor baron Vijay Mallya, is preparing the stage to make the 10% preferential allotment in his flagship United Spirits to global spirits major Diageo.

This move follows the tepid response to the open offer by Diageo to the public shareholders of United Spirits, in which Diageo managed to get hardly 0.44% of the intended 26%. It is understood that the preferential allotment of 10% will happen before May 26 th , 2013, for which Diageo will be paying Rs 2,094 crore.

Post this, Diageo’s move to acquire a further 17.4% stake for Rs 3,632 crore will depend on how the Judge at the Karnataka High Court will deliver his judgement after hearing winding up petitions of UB Holdings, filed by unsecured creditors of Kingfisher Airlines.

As part of the multi-pronged Rs 11,165 crore agreement signed between Diageo and Vijay Mallya during early November 2012, Diageo was supposed to get 12.8% stake from UBHL’s holdings in United Spirits and another 6.5% by buying treasury shares in United Spirits.

“At the end of all arguments at the Karnataka High Court during last week, the Judge has reserved the judgement. We are hoping that the judgement will not be delayed much,” senior advisors for the UB Group told Business Standard. “There is a strong opinion in the legal circles that UB Holdings is not a fly-by-night operator,” they added. The share purchase agreement is understood to be valid till six months, post the open offer which concluded on April 26, 2013.

UB Holdings in an effort to seek Karnataka HC’s nod to sell its shares to Diageo had submitted to furnish a deposit of Rs 100 crore and has said that they will be able to clear the dues towards the unsecured creditors post the transaction with Diageo.

As and when Diageo gets to the 27.4% mark in India’s largest spirits company – United Spirits, the board of United Spirits had earlier signed the agreement that they will be voting in favour of the decisions taken by Diageo, even if they (Diageo) do not get the 50.1% control in United Spirits.

Even as Diageo is waiting in the wings to take charge of managing United Spirits, they along with Mallya are understood to be actively working on how to address the concerns of Office of Fair Trade in London over owning majority control of Whyte & Mackay, the subsidiary of United Spirits in Scotland which has large reserves of scotch. According to industry observers, Diageo may have to offload majority stake in Whyte & Mackay to clear this hurdle and steps are being taken in this regard. Advisors to UB Group however indicated that they have around six months to address that issue post the closure of the deal of the transaction in India.

Source: Business Standard

http://www.business-standard.com/article/companies/mallya-readies-platform-for-10-preferential-allotment-to-diageo-113051900515_1.html