India: Diageo said to explore delisting of United Spirits

Diageo is said to explore options about a possible delisting of its majority owned subsidiary United Spirits (USL) in India. The UK-based global leader in beverage alcohol is currently holding roughly 56 percent stake in United Spirits through its Indian arm, but intends to buy out the remaining shareholders and delist the company, CNBC-TV18 cited sources familiar with the matter.

"The investment bankers will be giving a proposal and advising on the benefits, timing, and pricing of the offer," said a senior executive who did not want to be named. "The management believes that the current market conditions and the pricing of USL is conducive to a delisting and that's why they are exploring this option," the executive was cited.

Diageo took its stake in USL in a series of transactions between 2012 and 2014. In 2012 it offered to buy for USD 2.1 billion a majority stake in United Spirits which was controlled by Vijay Mallya. Mallya is son of drinks entrepreneur Vittal Mallya, who founded both USL and United Breweries (UB). The son, however, after successfully transforming UB Group into a multinational conglomerate had to sell part of his fortune after the collapse of his Kingfisher Airline in 2012 which never made a profit in the seven years of its existence.

In August last year, the drinks giant upped its shareholding to 55.2% following a USD 27.3 million investment. In February, Diageo bought another 5,075,000 shares (around 0.70% shareholding) in USL from the National Stock Exchange of India, bringing the shareholding up to 55.9%. When announcing the latest purchase Diageo said that “India remains one of the most exciting growth markets in the world for total beverage alcohol.”

The remainder of the shares is currently held publicly via USL stock market listing.

Given the actual market price, the outstanding shares would cost Diageo slightly more than USD 2 billion, but holders would be likely to demand a premium. Timing seems to be favorable for Diageo because the share market in general has lost much of its value over the last months due to the COVID-19 crisis. However, the company is hopeful of a bounce back led by strong demand.

When asked about the matter by media, Diageo said "as a policy we do not comment on market rumor and speculation".

Share this article: