Diageo’s United Spirits plans merger with its Indian subsidiary Pioneer Distilleries

INDIA – United Spirits Limited, the Indian unit of the global liquor company Diageo, has proposed a merger with its majority owned and listed subsidiary Poineer Distillers Limited, reports India Times.

According to United Spirits, 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.

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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%. Diageo first acquired a controlling stake in United Spirits in 2014 through a US$1.4 billion tender offer.

“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,” said Sanjeev Churiwala, executive director and CFO, Diageo India.

The Bengaluru-headquartered United Spirits recently reported a 13% decline in net profit to Rs 224.6 crore (US$31.4m) for the second quarter ended September.

The company said that the business was impacted by slowdown in consumer demand, liquidity challenges in certain markets as well as temporary supply chain disruption in scotch portfolio, notwithstanding a high base.

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.  

Diageo believes that United Spirits is a “highly strategic asset” that allows the company to “capitalise on opportunities within India, one of the most exciting growth markets in the world for total beverage alcohol”.

United Spirits recently entered into a share purchase agreement for the sale of its entire equity share capital and all associated brands in Four Seasons Wines (FSWL) to Grover Zampa Vineyards and Quintela Assets.

The company said the divestment was part of the its strategy to successfully continue to monetise its non-core assets, including subsidiaries.

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