Diageo completes acquisition of 25.02% stake in USL - Business Standard

Diageo, the global spirits major, on Thursday completed the acquisition of a further 14.98% stake in Vijay Mallya's United Spirits Limited (USL), the country's largest company in this segment for around Rs 3,134 crore (£344,190,791).   However, Mallya has not been able to get the 2.38% of share capital released, which was pledged with the lenders. The UB Group has said that they are making efforts to get it released at the earliest. Post this transaction, Mallya with his promoter-led companies, will hold 11.08% of USL's enlarged share capital. With this, Diageo's holding in USL has gone up to 25.02%. Diageo paid Rs 1,440 per share and funded the acquisition through existing cash resources and debt. With the completion of the share purchase agreement, the shareholders' agreement between Diageo, United Breweries (Holdings) Limited and Kfinvest, a subsidiary of UBHL has come into effect. Vijay Mallya, Chairman of the UB Group, said: "I am very pleased that we have completed our Share Purchase Agreement today. USL has entered into the next stage on its journey and I look forward to remaining part of that journey in my role as chairman of USL." Earlier, on May 27, 2013, Diageo subscribed to a preferential allotment of new shares in USL amounting to 10% of the post-issue enlarged share capital for a consideration of Rs 2,092.71 crore (£249,255,052). Separately, Diageo acquired 58,668 additional USL shares in the tender offer for a total consideration of Rs 8.57 crore (£983,789). Diageo, therefore, now holds 36.35 million shares representing 25.02% of the enlarged USL share capital at an aggregate cost of Rs 5,235 crore (approximately £594,429,632). This represents 18 times USL's EBITDA for year-ended March 31, 2013 and the transaction is expected to be EPS accretive from the second year and economic profit positive from the fifth year 5 a 12% WACC (Weighted Average Cost of Capital).   Diageo's 25.02% shareholding in USL, together with the voting and other governance arrangements agreed with the UBHL group, including Mallya's continued role as chairman of USL, will give Diageo control and enable Diageo to fully reflect the results of USL in its consolidated accounts which it expects to do from January 1, 2014.  Prior to this, Diageo will equity account its shareholding in USL.   Ivan Menezes, Chief Executive of Diageo, said: "USL's strong market-leading position combined with Diageo's strength and capabilities opens an exciting and important new chapter for Diageo in the attractive Indian spirits market. Since we received approval for this transaction we have been getting ready for closing and integration. Having completed the share purchase, we will now begin the work to identify and capture significant growth opportunities within this attractive market." Last November, Diageo had announced a multi-pronged Rs 11,165-crore deal to acquire up to a 53.4% stake in USL, owned by Vijay Mallya. In addition to the open offer, Diageo had struck a deal with Mallya's UB Group to acquire a further 27.4% through a preferential allotment and also treasury stocks in the US. However, the company drew poor response from the public for its open offer launched between April 10 and 26 for acquiring 38 million shares at Rs 1,440 a share. Key Highlights * Mallya will continue as non-executive director and chairman of USL. Ashok Capoor will continue as CEO of USL * Diageo is now the major shareholder in USL with a shareholding of 25.02% * Diageo has funded the acquisition through existing cash resources and debt * Mallya with his promoter led companies will continue to hold 11.08% of USL's enlarged share capital via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNFBhmMyXCq8MQFhP_bsXC9JfmqTZg&url=http://www.business-standard.com/article/companies/diageo-completes-acquisition-of-25-02-stake-in-usl-113070400973_1.html

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