United Spirits sells UB stake to Heineken, loses promoter status

Diageo plc, the majority shareholder in United Spirits Ltd (USL), has sold its 3.21 per cent stake in United Breweries Ltd (UBL), India's largest beer company, for Rs872 crore to Heineken International BV, the co-promoter of the beer company.

In a filing with the Bombay Stock Exchange USL notified the sale of its outstanding equity holding amounting to 8,500,000 shares in United Breweries Limited to Heineken International BV at a price of Rs1,030 per share.

The aggregate consideration of the share sales through block deals net of brokerage costs is Rs872 crore, the filing added.

Following the completion of this sale, United Spirits Limited will hold no shares in United Breweries Limited and ceased to be a 'promoter' of the company. Vijay Mallya, chairman of the group, also stands to lose control of the beer company.

With this, Heineken's stake in UBL has risen from 39 per cent to 42.2 per cent, while the UB group's stake will stand at 32.6 per cent.

In a statement to stock exchanges, USL said Heineken International BV was named the promoter of UBL, according to the latest shareholding pattern available on exchanges.

In December 2013, Heineken had bought 1.35 per cent stake in UB from Mallya for Rs275 crore. At that time, both Mallya and Heineken held stakes of 37 per cent each.

''Further, Heineken is not a related party of the company and this sale does not constitute a related-party transaction,'' it said, adding that the disinvestment was part of a process of monetising certain non-core assets of the company, as disclosed in October last year.

The sale, however, helped United Spirits cut its losses substantially.

With Heineken increasing its stake in UBL, cash-strapped Vijay Mallya, chairman of the UB group, is slowly losing control over the beer company as well.

In 2012, Mallya had sold United Spirits to Diageo for $2.1 billion.

United Spirits is also in talks with the Sajjan Jindal group to sell its cricket team, Royal Challengers Bangalore, for about Rs400 crore, bankers to the transaction said, adding that talks on the team's valuation are currently underway.

Diageo, which owns United Spirits and the company's chairman Mallya are locked in a fierce battle over alleged fund diversion worth Rs2,100 crore by Mallya's entities. According to Diageo, the fund diversion took place before it took over United Spirits.

In fact, USL had, at a board meeting in April this year, asked Mallya to quit its board as chairman but Mallya refused.

USL had then threatened to move the regulators about alleged fund diversion.

But Mallya hit back, saying USL had signed the takeover agreement with its ''eyes wide open'', adding it couldn't complain about the deal after three years.

The Securities and Exchange Board of India, the ministry of corporate affairs and the Institute of Chartered Accountants of India are investigating Diageo's allegations of fund diversion against Mallya.