Vijay Mallya may finally be closing in on a deal to cede control of his key liquor business to Diageo, media reports have said. The move, however, is not going to be a cakewalk.
The deal may even result in Mallya, who owns around 28 percent in United Spirits, losing the chairmanship of his flagship liquor company, and become a mere shareholder, they said.
According to a report in the UK’s The Telegraph , Diageo is likely to clinch a deal by next month.
AFP
The deal will give Diageo a strategic control over the Indian company, the report said.
A Bloomberg report said Diageo is likely to get the right to appoint “a majority of United Spirits’s board members, including the chairman”.
Mallya, however, will remain a shareholder, the report said.
Sale of stakes in United Spirits and United Breweries is a way for Mallya to get the much required funds for its Kingfisher Airlines.
But even this is not going to be easy. For one, Mallya wouldn’t want to lose the control of his liquor business. So, if Diageo insists on getting management control, Mallya may back out. Moreover, according to a Business Standard report, if Diageo gets United Spirits, the British company is likely to come under the scanner of the competition watchdog.
This is because United Spirits owns Scottish whisky major Whyte & Mackey. If Diageo acquires United Spirits, it may create a monopoly in spirits business, the report said.
Even though the government has allowed foreign airlines to pick up 49 percent stake in Indian counterparts, debt ridden Kingfisher is unlikely to get any investment.
As a Firstpost article pointed out Mallya’s airline company is not worth rescuing simply because of the Rs 7,000 crore debt burden and a similar amount of accumulated losses. These figures do not includes the company’s dues to everyone from the taxman to airports and oil suppliers.
“Why would any investor with, say, Rs 5,000 crore want to take on a walking wounded operator like Kingfisher?” the article said.
