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Diageo Reportedly Seeking 25% Stake In USL For Around $800 Million

September 28, 2012

Diageo’s talks with Indian spirits giant United Spirits Ltd. are aimed toward taking a 25% stake in the company for a price in the area of $800 million, according to new reports. The talks, which Diageo and USL confirmed in a joint statement earlier this week, could see Diageo buy a 15% stake in USL from current controlling shareholder Vijay Mallya (who owns around 28% of USL), and add another 10% from other shareholders, Reuters reported today quoting unnamed sources. The report added that if Diageo were to succeed in securing that deal, it would be required to launch a mandatory open offer for at least an additional 26% of USL, raising its stake above 50%.

The $800 million figure is based on Diageo’s reported offer of 1,300 rupees a share. Mallya, who would retain non-controlling stake in USL under the above deal, is said to be seeking 1,600 rupees a share. Disagreements over valuation have scuttled previous talks between the two parties dating back to 2009. Mallya, whose Kingfisher Airlines business is struggling under a heavy debt load, is said to be more eager for a deal this time around. While Kingfisher’s travails have frequently been cited as the motive for that eagerness, some analysts say Mallya will not throw good money after bad in regard to the airline and is instead seeking to ease USL’s own debt burden, which was $1.52 billion at the end of March.

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