As it happened: Not sold family jewel, only embellished it, says Mallya

Deal clinched: Mallya agrees to cede control of USL

Finally, Vijay Mallya has done the deal.

Diageo is set to buy 27.5 percent stake in United Spirits for Rs 5,725 crore. Diageo will launch a mandatory open offer for 26 percent stake to the existing shareholders of United Spirits. Diageo is expected to spend Rs 5441 crore for the open offer, taking the total deal value to Rs 11,166 crore.

Under the terms of the deal, Diageo would eventually get a 53.4 percent stake in United Spirits, although Mallya would remain as chairman and retain a material shareholding.

According to the deal, following the stake sale, United Breweries will continue to hold 14.9 percent stake in United Spirits. UBHL currently owns 27.8% of USL’s share capital.

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Diageo will acquire 19.3 percent of the current equity capital for Rs 1,440/share. United Spirits will make a preferential allotment of 10 percent equity at the same price. However, United Breweries will sell additional stake if the preferential allotment is not successful.

“Following the transactionse, if Diageo’s stake is less than 50.1%, the share purchase agreement obliges UBHL to vote in favour of all USL resolutions proposed by Diageo for four years,” the statement said.

The valuation is in line with market expectations. But the deal is subject to regulatory approvals.

The deal between the two companies is expected to be completed before 2013-end. However, it is subject to regulatory approvals in India and abroad.

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It will infuse Rs 2,090.7 crore in fresh equity.

Both the companies are set top make an announcement after the market hours today, said the report.

Cash infusion will help USL de-leverage itself: Vijay Mallya

On the financial details, Mallya said United Spirits, which has a Rs 8300 crore debt, will get around Rs 3,300 crore from the deal which will be used to retire some of the debt, while United Breweries will get around Rs 2,400 crore.

He added that the deal will give United Breweries the much-needed cash required for deleveraging.

On further details about how the funds will be utilised, Mallya said, “There is a limit to which we can tell you on how we will spend every paisa. Boards of the public companies will decide the best use of these funds.

On United Spirits shares that are with lenders, Mallya said “Will do whatever is required to clear the title.”

Moreover, all inter-company issues will be sorted out, including treasury stocks of United Breweries.

Not aware of any lenders’ deadline for Kingfisher Airlines

On rehabilitation of Kingfisher Airlines, Mallya said the issue will be decided separately. He added that United Breweries Holding will deal with the Kinfisher capital infusion.

He, however, claimed that he was not aware of any deadline set by lenders for Kingfisher Airlines. He said he is currently working towards a comprehensive rehabiliation and recapitalisation plan for the airline. “It will be unfortunate if you try to link this transaction with the airline. I am doing what I am doing in the best interest of United Spirits and its shareholders. And i will obviously do my best for Kingfisher Airlines as well.”

On inking the deal, Vijay Mallya said that Diageo gives United Spirits the best possible platform for future growth. “Proud Of USL and what has been created over the last 30 years,” he said.

Not sold family jewel, only embellished it

When Mallya was probed about why he sold his cash-cow and family jewel ( the liquor business), he was quick to retaliate that he has not sold the family business, rather he has embellished it. He clarified that the deal is not a sell-out but his perception of the needs of Diageo. “I recognize Diageo’s consolidation need and I have whole-hardheartedly agreed to this partnership (Read not control).”

Deal is a win-win for both

Ivan M Menezes, COO at Diageo, said the deal is a win-win for both companies and will enhance Diageo’s position in the world’s fastest growing market as it brings together the strength of both companies. Diageo, however has no plans on increasing its stake to 100 percent in the company.

No intention of taking United Spirits private, says Diageo

It also clarified that the intention is to keep the two business separate as of now.

He sees the beverage market in India valued at $6 billion and growing at a rate of 15 percent.

Shares of United Spirits and UB Holdings end up

[caption id=“attachment_520480” align=“alignleft” width=“380”]  The shares have been rising on speculation of the deal. United Spirits had risen as much as 6.1 percent. PTI[/caption]

Shares of United Spirits closed at Rs 1,359.70, up 1.22 percent percent and those of United Breweries Holdings closed up 3.3 percent up at Rs 136.05.

The shares have been rising on speculation of the deal. United Spirits had risen as much as 6.1 percent.

Purchase biggest inbound Indian M&A deal post Cairn-Vedanta deal

The purchase would be the biggest inbound Indian M&A deal since British oil firm Cairn Energy sold a majority stake in its Indian business to Vedanta Resources last year. The Diageo deal concludes an on-again, off-again courtship that began in 2008.

Final opportunity to revive fortunes of the group

The agreement comes after months of haggling and will ramp up Diageo’s presence in the world’s largest whisky market. The deal would also help Mallya gain much-needed cash to reduce the debt borne by United Spirits and free up funds to revive his grounded Kingfisher Airlines.

“Some of the Mallya group companies have been in turbulence for some time. This is his final opportunity to revive the fortune of the group,” Jagannadham Thunuguntla, head of research at SMC Investments and Advisors told _Reuter_s.