Diageo bids $1.9 bln for control of United Spirits
on 16/04/14 at 6:17 pmIndustry
Diageo PLC Tuesday made a $1.9 billion offer to take control of India’s United Spirits Ltd., the latest attempt by the U.K. liquor giant to forge a dominant position in the world’s biggest whiskey market.
Diageo said Tuesday it made an open-market offer for an additional 26% stake in United Spirits, for 3,030 rupees (about $50) a share. If the deal is successful, Diageo’s total stake would rise to 54.78%, giving it long-sought-after strategic control over India’s biggest spirits maker and further access to the country’s whiskey-thirsty population.
Shares of United Spirits jumped 11% on the Bombay Stock Exchange immediately after the offer. Diageo shares were flat just after midday in London trading.
The bid is the latest chapter in a corporate saga that started in 2012, when Diageo first attempted to buy 53% of United Spirits for $2 billion. Under that agreement, Diageo had planned to buy 27.4% of United Spirits from its chairman, Vijay Mallya, and another 26% on the public stock markets. But when Diageo last year attempted to buy the remaining 26%, its open offer was met with muted interest from investors, and the company fell short of gaining a controlling stake.
A spokesman for Mr. Mallya’s United Breweries Group declined to comment.
Tuesday’s offer price to shareholders was more than double that previous offer. Diageo expects the deal to be successful this time around because of the premium, according to a person familiar with the matter. “Clearly Diageo wouldn’t be doing this if they weren’t confident,” this person said.