Indian Court Challenges Portion Of Diageo’s USL DealDecember 23, 2013
More than a quarter of Diageo’s current 26% controlling stake in Indian spirits giant United Spirits Limited (USL) has been challenged by an Indian appeals court, which says that a portion of the shares sold to Diageo by former USL parent United Breweries Holdings Limited (UBHL) are in fact owed to UBHL creditors.
The division bench of the Court of Appeal in Karnataka declared on Fridaythat UBHL’s July 4 sale to Diageo of 10.1 million shares, or about 6.9% of USL, was void. Those shares were part of a transaction in which Diageo acquired a total 14.98% of USL for around $563 million. The appeals bench’s decision was a reversal of a previous ruling by the High Court of Karnataka granting the sale to take place despite five winding-up petitions then pending against UBHL, whose Kingfisher Airlines subsidiary is in dire financial straits.
In a statement to SND, Diageo said it doesn’t believe there are any grounds for nullifying the sale and that it will appeal the matter further. “We are also disappointed, as a bona fide purchaser for value of the USL shares, that we have been brought into the private dispute between Kingfisher Airlines and its creditors,” the statement read.Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.