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Mallya loses his spirits business

business Updated: Jul 06, 2013 01:29 IST
HT Correspondents

Diageo, the world's most valuable liquor company, which, on Thursday, took control of United Spirits, the world's largest alcohol company by volume, will focus on integrating the two companies and consolidating its presence in the Indian market.

"With this acquisition, we will be well positioned to capture the profitable growth opportunities presented by the Indian spirits market," said Andrew Morgan, president, new businesses, Diageo.

Diageo, which owns brands such as Johnny Walker, Smirnoff and Gordon's Gin, on Thursday bought a 15% stake from UB Group chairman Vijay Mallya for an estimated Rs 3,135 crore, and appointed five directors on the USL board. It had earlier acquired a 10% stake through a preferential offer. A spokesperson for Mallya declined comment.

Diageo, managed by India-born CEO Ivan Menezes, had planned to raise its shareholding to 53% but had to settle for 25%, less than half the envisaged level, as its open offer at R1,440 per share flopped. Mallya will retain an 11% stake and remain chairman of the company. USL shares have jumped more than 120% since November, when the deal was announced, to Rs 2,531.70 on Friday.

“Diageo needs to build its Indian portfolio, said Gaurang Kakkad, VP, Religare.

The acquisition will give the UK multinational a readymade pan-Indian distribution network and manufacturing facilities across India, where complex state-level laws have stymied the plans of many of its MNC rivals.

“This acquisition gives Diageo a bigger portfolio of spirits locally and an opportunity to bring in more of its international brands into India at a more affordable price by manufacturing them here. Besides, it can use USL’s reach to expand ,” said Nikhil Agarwal, director, All Things Nice.