Diageo May Be Close To Deal With Mallya’s UB Group

New fuel has been added to rumors that Diageo will take a stake in Indian spirits giant United Spirits Ltd., part of Vijay Mallya’s UB Group empire. Bloomberg cited four unnamed sources this morning who said talks between the two parties are at an advanced stage, with a deal possible by next month. The rumored transaction could see Diageo gain the right to appoint a majority of USL’s board, including the chairman.

Reports out of India this summer claimed Diageo was seeking up to a 27% stake in USL. Those reports also suggested that USL was shopping at least part of its Whyte & Mackay Scotch whisky unit. Diageo and USL explored a similar deal in 2009 but couldn’t agree to terms. Neither company has commented on the current situation.

Mallya, who owns 28% of USL, is in need of cash to maintain his Kingfisher Airlines business, said to require $600 million within the next two months to satisfy creditors. While the airline business has struggled, USL continues to thrive. With local spirits brands including McDowell’s No. 1 (whisky, rum and brandy), Bagpiper (whisky and rum) and Old Tavern whisky, it’s now the second-largest spirits player worldwide by volume behind Diageo, rising 8.9% to 120.5 million cases last year, according to Impact Databank. Its top competitors in India include Pernod Ricard (whose Indian whisky Royal Stag, at 12.5 million cases, is now its largest brand, surpassing Absolut last year) and Allied Blenders & Distillers with its Officer’s Choice whisky.

Diageo, which was formerly partnered with local players Sun Tan Trading and Radico Khaitan in India, brought its distribution in-house over the past year. A stake in USL would grant it significant incremental distribution leverage in India to expand its global premium brands in this fast-growing emerging market, as have its recent deals for Mey Içki in Turkey, Halico in Vietnam and Ypióca cachaça in Brazil.

Tagged : Diageo, India, spirits, United Spirits

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