UK's Diageo buys stakes in Vijay Mallya's United Spirits

Friday, 9 November 2012 - 8:17pm India News Bulletin Desk

Smirnoff owner Diageo buys stakes in United Spirits

Image: Wikimedia Commons (Arne Hückelheim)

British multinational alcoholic drinks maker Diageo has purchased majority stakes worth £1.2bn in Indian liquor baron Vijay Mallya’s United Spirits Group. Diageo's 53.4% in United Spirits is seen as a move to capture India's large and growing spirits market.

Diageo will first acquire a 27.4% stake in United Spirits for Rupees 1440 per share and the total consideration of about £660m. It will buy a further 26% stake in the Indian group later by launching a mandatory offer.

Mallya will continue in his current role as United Spirits's chairman and will "work with Diageo to build the business as the current consumer trends for premiumisation accelerate in India", Diageo said in a statement.

The news comes two months after Diageo was in talks with Mallya to buy more than 15% stake in the Indian liquor company. In September, the British and Indian company together issued a joint statement saying: United Spirits Limited and Diageo plc confirm that Diageo is in discussion with United Spirits Limited and United Breweries (Holdings) Limited in respect of possible transactions for Diageo to acquire an interest in United Spirits Limited.

The statement also warned that there is no certainty that these discussions will lead to a transaction.

Mallya’s ailing alcoholic drinks company United Spirit has a debt of more than 8,000-crore rupees. It is not yet clear whether chairman Mallya will use the proceedings of the sale of a stake in United Spirits to fund his Kingfisher airline business.

United Spirits Limited has 144 brands under its umbrella, including White Mischief vodka, a popular barnd in India. It also owns the Whyte & Mackay Scotch Whisky brand, which it acquired in 2007 for £595m. Diageo’s brands include Johnnie Walker, Crown Royal, Smirnoff, Baileys, Guinness, Buchanan’s, Captain Morgan and Windsor and Bushmills whiskies among others.

The combination will enable Diageo to grow across the consumer space as India’s increasing number of middle class consumers look to enjoy premium and prestige local spirits brands as income levels rise, said Paul Walsh, Diageo's chief executive.