Diageo splashes out with United Spirits purchase

British multinational Diageo has purchased a 27.4% stake in United Spirits (USL). USL is part of the Bangalore-based United Breweries Group, which markets beer under the Kingfisher brand and launched the now struggling Kingfisher Airlines.

Vijay Mallya, the promoter of United Spirits and Kingfisher Airlines, says the Diageo-United Spirits deal is unconnected to the airline’s woes. “We have multiple businesses and each business operates independent of each other,” Mallya told reporters in India. “There is no cross-contamination.” He added that he had done what was best for his spirits business and would address the needs of Kingfisher Airlines, but that this would be a separate exercise.

Diageo agreed to acquire a maximum of 37,785,214 shares (19.3%) of USL for ₹1,440 (US$26) per share from United Breweries Holdings (UBHL), the USL Benefit Trust, two subsidiaries of USL – Palmer Investment Group and UB Sports Management – and SWEW Benefit Company, a company set up to benefit certain USL employees. UBHL will continue to hold a 14.9% stake in USL and USL’s shareholders will be asked to approve a preferential allotment to Diageo of new shares amounting to 10% of the post-issue enlarged share capital of USL.