Heineken purchases 39.6m shares of United Breweries to bolster position as majority owner

INDIA- Heineken International B.V., the world’s second-largest brewing company, has acquired an additional 39.6 million shares of United Breweries, a leading alcoholic beverage company in India. 

With the acquisition, Heineken’s shareholding in United Breweries (UB) has increased to 61.50% from 46.50%, increasing the company’s influence on its India’s subsidiary and cementing its position as majority owner.  

The acquisition is a major win for Heineken as UB has undisputed market leadership with a national market share in excess of 50%.  

The UB Group today controls 60% of the total manufacturing capacity for beer in India. The company markets beer under the Kingfisher brand, and owns various other brands of alcoholic beverages. 

Heineken’s acquisition has received approval from the Competition Commission of India (CCI), allowing it to sail through without any legal hitches. 

Analyzing the development, Emkay Research noted that the increase in ownership may drive higher involvement and support from Heineken but may not result in any material benefits in the medium term. 

Emkey however noted that the acquisition is a positive and indicates Heineken’s commitment and interest in United Breweries and the Indian beer market. 

Heineken’s increased involvement comes at a time when the company is experiencing steep sales decline in FY21, driven by covid restrictions. 

Despite the poor performance, United Breweries has made sustained investment behind brands and increased footprint for premium brands. 

Recent annual report also indicates investments in value brands to grow the category, substantial savings in fixed costs, and increase in initiatives for water conservation and carbon footprint reduction. 

Meanwhile, a consortium of Indian Banks is after an 11% stake of United Breweries that is owned by fugitive former chairman Vijay Mallya. 

The banks had granted loans of up to £1.15 billion to support his Kingfisher Airlines, which spectacularly collapsed into bankruptcy in 2012. 

It is reported that more than 98% of Mallya’s personal holding in UB had been pledged to the banks or was otherwise encumbered. 

It is widely assumed that Heineken will wish to increase its effective control of UB by buying a tranche of shares from the creditor banks further cementing its ownership of the company. 

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