July 4, 2013 – Diageo has completed its third and final tender offer for shares of India’s United Spirits, and will take operational control of the Vijay Mallya-led company. However, the tender offers resulted in Diageo holding just 25% of United Spirits’ outstanding shares, instead of the 53.4% stake the world’s largest alcoholic drinks company intended to acquire when the deal was first announced last year.
The final tender offer cost Diageo around 31.3 billion rupees ($521 million USD), according to Bloomberg News, and netted Diageo an additional 14.98% of the company’s shares. While Diageo will be the largest shareholder in United Spirits, it will depend on agreements with Mallya’s UB Group to give it day to day control of the the company. UB Group has pledged to vote its shares at Diageo’s direction until 2018 or until Diageo acquires 50% of United Spirits shares.
The original plan for a majority stake collapsed when investors holding some of Mallya’s United Spirits shares as collateral for loans to his troubled Kingfisher Airlines refused to release them for sale to Diageo. In addition, many shareholders declined to sell their holdings in Diageo’s mandatory tender offers, since the offer price of approximately $23.96 USD per share was well below the company’s current price of $42.54 per share on Indian markets. Mallya will continue as United Spirits chairman and a non-executive director, while Diageo will name a new executive team led by Ashok Capoor as CEO.
Still to be resolved is the future of Whyte & Mackay, the United Spirits-owned Scotch whisky unit based in Glasgow. As reported previously on WhiskyCast, U.K. competition authorities are looking at possible remedies to resolve concerns over the deal’s impact on grain whisky production. Whyte & Mackay owns the Invergordon grain whisky distillery near Inverness, while Diageo owns the Cameronbridge grain distillery and a 50% share of the North British grain distillery. Competition authorities are reported to have expressed a concern that Diageo will wind up with an anti-competitive share of the grain whisky market as a result of the United Spirits acquisition.