Diageo, the world’s largest spirits group, has made no secret of its ambition to increase its market share in the world’s largest whisky market by volume.
The Scottish firm will reportedly attempt to initially buy a 15% stake from Mallya (who owns around 28% of the company) before targeting a further 10% from shareholders. A 25% stake for Diageo would dislodge Mallya as United’s largest shareholder.
"Emerging market sales would jump to 45% of Diageo sales from 40% now, and Diageo would gain a sizeable footing in what one day should be the world's largest Scotch market," analyst Pablo Zuanic at Liberum Capital told Reuters.
“There is no certainty that these discussions will lead to a transaction," said a United statement to the Indian stock exchanges.
The latest move follows a failed attempt in 2008 by Diageo to buy shares in United from Mallya but the Scottish firm may be more confident of striking a deal this time as Mallya aims to raise fund for his ailing Kingfisher Airlines business. One stumbling block could be price, with Diageo reportedly willing to part 1,300 rupees a share – short of Mallya’s 1,600 a share valuation.
An offer of 1,300 rupees a share would value Mallya’s 25% stake in United at around $793 million. The market value of Diageo is around $2.7 billion.
