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Diageo strikes USD2.1bn deal for United Spirits stake.


9 November 2012 - British branded premium alcoholic beverages group Diageo Plc (LON:DGE; NYSE:DEO) said on Friday it had agreed a deal worth some INR111.7bn (USD2.1bn/EUR1.6bn) to buy a total stake of 53.4% in Indian sector player United Spirits Limited (BOM:532432), or USL.

Under the terms of the agreement, Diageo is buying 19.3% in USL at INR1,440 a piece from United Breweries (Holdings) Ltd (BOM:507458), or UBHL, the USL Benefit Trust, Palmer Investment Group Limited, UB Sports Management and SWEW Benefit Company. It will then take additional new USL shares in a preferential allotment, representing 10% of the enlarged capital, subject to clearance by the targeta[euro](tm)s shareholders, bringing its stake in USL's enlarged capital to 27.4%.

Following this move, Diageo will buy further up to 37.8m USL shares from the public shareholders via a mandatory bid. These shares account for 26% of the enlarged capital of USL, the buyer said.

Vijay Mallya, the current chairman of USL, will continue in his role after the deal. Mallya and Diageo also signed a memorandum of understanding to form a 50/50 joint venture to own United National Breweriesa[euro](tm) sorghum beer business in South Africa. The partners plan to expand the JV to some emerging markets in Africa and Asia, excluding India.

Commenting on the agreements, Diageoa[euro](tm)s CEO Paul S Walsh said they serve the groupa[euro](tm)s strategy of building its presence in the fastest growing markets in the world, while working to become a top premium drinks company globally. The deal with USL will allow Diageo to grow in the expanding consumer segment in India, while ensuring USLa[euro](tm)s top position in the local spirits sector, Walsh said further, adding that the combination would generate value for both companiesa[euro](tm) shareholders.

For his part, Mallya sees the partnership with the British group gives USL the best platform for future development, he noted.

Completion is expected in the first quarter of 2013, subject to regulatory approvals, with financing to be covered by Diageo with existing cash and debt.

The buyer used the advisory services of JM Financial Ltd (BOM:523405), BofA Merrill Lynch, UBS AG (NYSE:UBS), Slaughter and May and Platinum Partners. Citigroup Global Markets, Ambit Corporate Finance, Amarchand and Mangaldas & Suresh A Shroff & Co, Herbert Smith Freehills LLP and Kanga & Co acted as advisors to UBHL and USL.Country: India, South AfricaSector: Food/Beverages/TobaccoTarget: United Spirits Limited Buyer: Diageo Plc Vendor: Public shareholders, SWEW Benefit Company, United Breweries (Holdings) Ltd, Palmer Investment Group Limited, UB Sports Management , USL Benefit TrustDeal size in USD: 2.1bnType: Corporate acquisition, JVFinancing: Cash & Debt, Existing resourcesStatus: Agreed, Bidding, ExclusivityBuyer advisor: JM Financial Ltd, BofA Merrill Lynch, UBS AG, Slaughter and May, Platinum PartnersComment: Deal size refers to price for the USL stake., MoU

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Publication:M & A Navigator
Geographic Code:9INDI
Date:Nov 9, 2012
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