British drinks giant Diageo may end up with a majority stake in Vijay Mallya's United Spirits Limited (USL) if the ongoing talks between the company and USL are successful, people close to the development said. Mallya and Diageo, who have been in talks since early this year, are discussing a three-stage transaction giving the British major an undisputed sway over the Rs 16,000-crore local liquor market. According to the Economics Times report, legal firms Amarchand & Mangaldas for USL and Platinum Partners for Diageo are drafting the documents.
If the talks are successful and Mallya agrees to part with control, the deal could be announced within a few weeks, they added. Yesterday, in a rare joint statement, Diageo and USL said Diageo was in talks with USL and UB Holdings for a possible investment in the former. "However, there is no certainty that these discussions will lead to a transaction," the statement said. USL shares rose 9 per cent to 1,147.7 on Tuesday. The shares have zoomed 132 per cent since the beginning of the year on hopes of a successful transaction with Diageo. As per the terms of the transaction, Mallya will sell a 12 per cent stake to Diageo, which will follow it up by buying the treasury stock of the company owned by a trust. He may sell majority stake in United Spirits to Diageo. United Spirits will then make a preferential allotment to Diageo, giving the British giant a 25 per cent stake. This will be followed by an open offer to minority shareholders. Mallya will hold around 15 per cent in the company and be its chairman, a person close to the situation said. A senior official of USL said the talks with Diageo were ‘exclusive’ and that the company was not in talks with anyone else for a stake sale. But the official was not forthcoming on the timeline because of the ‘complexity of the transaction’. "We have discussed different plans, permutations and combinations. Mallya will have to give the last word. He should decide whether to cede control of the flagship," said a banker, as per the report.
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If the talks are successful and Mallya agrees to part with control, the deal could be announced within a few weeks, they added. Yesterday, in a rare joint statement, Diageo and USL said Diageo was in talks with USL and UB Holdings for a possible investment in the former. "However, there is no certainty that these discussions will lead to a transaction," the statement said. USL shares rose 9 per cent to 1,147.7 on Tuesday. The shares have zoomed 132 per cent since the beginning of the year on hopes of a successful transaction with Diageo. As per the terms of the transaction, Mallya will sell a 12 per cent stake to Diageo, which will follow it up by buying the treasury stock of the company owned by a trust. He may sell majority stake in United Spirits to Diageo. United Spirits will then make a preferential allotment to Diageo, giving the British giant a 25 per cent stake. This will be followed by an open offer to minority shareholders. Mallya will hold around 15 per cent in the company and be its chairman, a person close to the situation said. A senior official of USL said the talks with Diageo were ‘exclusive’ and that the company was not in talks with anyone else for a stake sale. But the official was not forthcoming on the timeline because of the ‘complexity of the transaction’. "We have discussed different plans, permutations and combinations. Mallya will have to give the last word. He should decide whether to cede control of the flagship," said a banker, as per the report.
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