Diageo finally acquires required 26% for control of United Spirits

Diageo Plc, the world's largest distiller, has acquired an additional 26 per cent stake in United Spirits for Rs11,448 crore, taking its total share in India's largest liquor maker to nearly 55 per cent, Diageo said on Wednesday.

Diageo said it has completed a tender offer to acquire the shares after its first attempt to do so in November 2012 failed due to poor response.

Diageo, which owns famous brands like Johnnie Walker whisky and Smirnoff vodka, has invested a total of Rs18,023 crore to acquire a majority stake in United Spirits, previously controlled by liquor baron and failed airline promoter Vijay Mallya's United Breweries.

Diageo's first attempt to buy 26 per cent stake from the public was priced at Rs1,440 a share, and it was able to mop up only 0.4 per cent at that price.

In April this year, Diageo sweetened its offer by doubling the offer price to Rs3,030 a share, which resulted in overwhelming response from investors (See: Diageo seeks to buy additional 26% of United Spirits for Rs11,451.3 crore).

A statement from Diageo said the shares tendered and accepted by the company are in the process of being transferred to its wholly-owned subsidiary Relay BV and represent 26 per cent of United Spirits' issued share capital.

India is considered the world's largest whisky market but is strongly dominated by second-rate Indian brands – most of them not even grain-based – thanks to the outrageous import duties and local tax levels on foreign brands.

''India has now become one of Diageo's largest markets and will be a major contributor to our growth ambitions,'' Diageo chief executive Ivan Menezes said in a statement.

The statement also said the financials of United Spirits will be consolidated into Diageo's balance sheet from Wednesday.

On 29 June, Diageo said the Rs1,350-crore loan given by United Spirits to Vijay Mallya's UB Holdings might be accounted for in its balance sheet.

Last month, United Spirits offered to sell Whyte & Mackay, the Scottish whisky maker, for about $738 million after the UK Office for Fair Trading raised concerns that with Diageo taking over the Indian liquor maker, it could lead to higher blended whisky prices in the UK (United Spirits to sell Whyte & Mackay to Philippines-based Emperador for $729 mn).