The majority stake will be bought for an amount exceeding $2 Bn and would be one of the biggest M&A deals in the country.
The deal is expected to give Diageo a greater and major market share in the spirits market of India. Currently it owns around 1% share as compared to 55% by USL and thus the consolidation resulting in a top position.
However it will be interesting to see how the money raised will be utilized. On one side there is the struggling-to-fly Kingfisher Airlines and on the other there is USL itself, which is carrying a huge debt burden.
Kingfisher's debt and accumulated losses are higher than the most valued company in the Mallya stable – United Spirits, with a value of over R11,000 Cr. Vijay Mallya holds 28% in the company.
UB Holdings holds close to 28% in USL of which as much as 98% has been pledged, a BS report stated.
Diageo is a British multinational alcoholic beverage company headquartered in London and is the largest producer of spirits and a major producer of beer and wine. Some of its brands include Smirnoff and Johnnie Walker. It sells its products in over 180 countries and has offices in around 80 countries.
USL was planning to sell 48% stake in its Glasgow arm Whyte & Mackay to pay off UB Group’s $4 Bn debt earlier in February this year.
The global alcoholic drinks industry is expected to exceed $1 trillion in 2014, according to MarketLine and global alcohol makers are looking to tap the growing Indian liquor market as increasing number of population is turning into the drinking age field.
Another brewery group, world’s fourth largest, Carlsberg, had earlier acquired a brewery in Haryana and was very optimistic on the spirit consumption outlook of India.
