Diageo injects US$48.7m for additional stake in India’s United Spirits Limited

INDIA – Diageo has acquired additional shareholding in India’s leading liquor company United Spirits Limited (USL), in a transaction that increases Diageo’s stake in the company to 55.9%.

Diageo paid US$48.72m to acquire additional 5,075,000 shares (approximately 0.70% shareholding) in the National Stock Exchange of India listed company at a per share price of INR693.25 (US$9.6m).

While Diageo first acquired a controlling stake in United Spirits in 2014 through a US$1.4 billion tender offer. The company has progressively increased its shareholding in United spirits over the years.

In August last year, Diageo purchased a further 3,310,515 shares (approx. 0.46% shareholding) in United Spirits for about US$27 million.

The London-based brewer says that United Spirits is a highly strategic asset for Diageo and positions the company well to capitalise on opportunities within India, one of the most exciting growth markets in the world for total beverage alcohol.

Infact, during the first half of fiscal 2020, the “Prestige and Above” segment in India grew by 5%, driven by Johnnie Walker and Black & White.

“India remains one of the most exciting growth markets in the world for total beverage alcohol. This transaction forms part of Diageo’s long-term strategy of premiumisation within the market,” Diageo said in a statement.

The transaction comes at a time when United Spirits has reportedly proposed a merger with its majority owned and listed subsidiary Poineer Distillers Limited.

United Spirits said in December last year that the amalgamation scheme has been approved at its board meeting and now awaits requisite approvals from statutory authorities including securities exchanges, shareholders and creditors of both the companies.

With the completion of this merger, the non-promoter shareholders of Pioneer Distiller will receive 10 equity shares of United Spirits for every 47 equity shares of Pioneer, held by them as on the record date.

Post merger, United Spirits’ issued capital will expand by about 0.1% and Diageo’s revised holding in the company will be 55.18%.

“The proposed merger is part of our strategy to consolidate the India business and further simplify the operating structure which would result in enabling business synergies and efficiencies,” Sanjeev Churiwala, executive director and CFO, Diageo India said at the time.

While the proposed merger is aimed at consolidating Diageo’s operations in India, Sanjeev added that the deal will also maximize shareholder value for both the companies.  

Headquartered in Bengaluru, USL employs more than 6,000 people and is represented in 81,000 outlets across India. It has over 88 manufacturing facilities across 23 states and three union ter-ritories in India, and exports its products to over 37 countries.

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