The world's biggest liquor maker, UK-based Diageo, has finalised the acquisition of a 53.4% stake in Vijay Mallya-controlled United Spirits Ltd (USL) for Rs. 11,166.5 crore.
The stake sale will help Mallya with the much needed cash to pay off USL's debt and free up funds to revive his Kingfisher Airlines that has been grounded since October.
The deal marks the biggest inbound merger and acquisition since Cairn Energy Plc of the UK had agreed to sell a majority stake in its Indian business to Vedanta Resources Plc for about Rs. 45,000 crore.
Diageo - whose portfolio includes Baileys liqueur, Captain Morgan rum, Guinness stout, Johnnie Walker whisky, Smirnoff vodka and Tanqueray gin - said it would first buy a 27.4% stake in USL for Rs. 5,724 crore, triggering a public offer that would see its holding eventually climb to 53.4%.
It also said in a statement that it would launch an offer to acquire an additional 26% in USL at Rs. 1,440 a share - 6% higher than Friday's closing of Rs. 1,359.7.
"This (India) will become Diageo's number two market after the United States and if you look at the projections on what's happening with the emerging middle class... it has the potential in the long term to become our largest market," said Diageo COO Ivan Menezes.
While Mallya will continue as chairman, Diageo will be able to nominate directors to the USL board and also appoint its managing director and CFO.
Mallya did not elaborate on how he plans to use part of the funds raised through the USL stake sale to bail out KFA amid increasing concerns over the carrier's future.
"We are working on a comprehensive rehabilitation plan that includes recapitalisation," Mallya told journalists in conference call from London.
KFA on Thursday reported a record loss of Rs. 754 crore for the second quarter ended September 30. Its revenues crashed by 87% to Rs. 200 crore during the quarter.
Its revenues plunged in the same period last year due to disruptions in operations leading to the suspension of licence last month.
Mallya said he was not aware of any deadline set by the bankers for recapitalising Kingfisher. The comment comes three days after SBI said the carrier would have to get capital "by the month-end".