Why Diageo will miss deadline for United Spirits' open offer

Pending regulatory nods from Securities and Exchange Board of India (Sebi), Reserve Bank of India (RBI) and Competition Commission of India (CCI) has delayed global liqour giant Diageo's open offer to shareholders of United Spirits.

According to a CNBC-TV18 report, the open offer to acquire 26 percent stake in UB group for Rs 5,441 crore will not be completed in by January 7-18, 2013, the earlier schedule announced by Diageo because of the delay in the above mentioned statutory clearances .

There is not much clarity on the revised timeline yet, but sources told CNBC-TV 18 that Diageo will together work on a revised timeline and plans on completing the transaction by the end of this quarter.

Reuters

In December 2012, shareholders of USL had approved the preferential allotment of shares to liquor giant Diageo, amounting to 10 percent at Rs 1,440 a piece, even though the market was hoping on some kind of revision of prices post the clearances from the regulatory authorities.

However, United Spirits is trading at a premium of 35% over the open offer price of Rs 1440. Analysts suggest even after Diageo gets the approvals, the open offer may not be very popular as the sharp jump in the stock has clouded the outcome of the tendering process.

On 9 November, the companies jointly announced that Diageo will acquire a controlling 53.4 stake in Vijay Mallya-promoted United Spirits for Rs 11,166 crore (nearly $2 billion). Mallya will continue in his current role as chairman of United Spirits.