USL sells United Breweries stake to Heineken: Will Mallya lose Kingfisher brewer too?

Diageo-controlled United Spirits Ltd (USL) has exited from United Breweries Ltd by selling its entire 3.21 percent stake in the company for Rs 872 crore, giving rise to speculation that Vijay Mallya may lose control over the company that makes the Kingfisher brand of beer. United Spirits sold its stake to Heineken International BV at a price consideration of Rs 1,030 per share, United Spirits said in a BSE filing. [caption id=“attachment_779581” align=“alignleft” width=“380”] Making an exit. Reuters[/caption] “…The company has placed an order for sale by way of a block trade on NSE of 85 lakh equity shares held by the company in United Breweries Ltd (consulting 3.21 percent stake) to Heineken International BV,” it said. USL further said: “The sale consideration net of brokerage is Rs 872 crore resulting in profit on this transaction.” In November 2012, Diageo had bought a controlling 55 percent stake in United Spirits Limited (USL), for about $3 billion (over Rs 11,000 crore) from the Mallya-promoted UB Group. Earlier this year, United Spirits asked its erstwhile promoter and current chairman Vijay Mallya to quit the board alleging fund diversion to the tune of Rs 1,337 crore to Kingfisher and other UB group entities although the liquor baron rejected the demand and the charge. USL said that following the completion of this sale, it will “hold no shares in United Breweries and will cease to be a promoter of United Breweries”. The sale is part of the process of monetising non-core assets of the company, USL added. The development assumes significance as with the latest stake acquisition Heineken’s stake in UB to 42 percent. As per the BSE data, Scottish & Newcastle had 34.04 percent stake in UB as of March 2015, while Heineken UK and Heineken International had 3.21 percent and 1.6 percent, taking the group’s total shareholding to 38.85 percent. Adding 3.2 percent acquired yesterday, the holding will be just above 42 percent. What this means is that technically Heineken can now take control of UB. According to a report in The Times of India, Mallya has about 32 percent stake in the company now. The report also quotes a UB official as saying that Heineken is now freed from a pact it had entered into with Mallya which mandated equal shareholding and equal management control of UB, and the international brewery is now all set to wrest control of the company. For the uninitiated, Heineken in 2004 had indirectly acquired a 37.5 percent stake in United Breweries following its worldwide takeover of Scottish & Newcastle (S&N) in January 2008. This had given rise to a lengthy battle between Mallya and Heineken, which ended in a pact that both the companies will hold equal stakes in the company. As per the ToI report, while Mallya’s fortunes were declining with Kingfisher Airlines taking a huge toll on his group’s financial health, Heineken quietly increased its holding by 2 percent as it bought out stakes pledged by Mallya to avail of loans for the troubled airline. As per the report citing sources, Heineken has now got rights to get full control of UB and the “equal and joint management clause” does not exist now. However, it is not certain that Heineken will indeed go for the kill and takeover the management control all together. A report in The Economic Times says there is no danger to Mallya but Heineken is likely to get more say in deciding the agenda and business plan of UB. If they indeed do that, Mallya may just be headed towards another air pocket. With inputs from PTI