Vijay Mallya-led UB Group & Diageo may have sealed a deal for United Spirits takeover

MUMBAI: Liquor major Diageo and Vijay Mallya's United Spirits are widely believed to have clinched a transaction giving the British company complete control over India's largest spirits producer, the makers of McDowell and Bagpiper whiskies.

At least five people close to the talks told ET the details have more or less been agreed upon and an announcement could come as early as Friday, barring some last-minute hiccups.

As per the terms of the deal, Diageo will buy more than 25% of United Spirits in three stages, including the purchase of some stake held by Vijay Mallya. Diageo will invest some money in the company and make an open offer.

Depending upon the success of the offer, Diageo's ultimate stake will be anywhere between 45-51%. The British company is expected to pay Rs 1,500-1,600 per share. Diageo will pay around $2 billion for buying a 51% stake.

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USL shares rose 3.3% to Rs 1,343 in anticipation of the announcement. At 10:16 AM, United Spirits was trading at Rs 1368.00, up 1.84% on the Bombay Stock Exchange. It hit an intraday high of Rs 1425.00 and a low of Rs 1358.00.

The Diageo brass and Mallya are understood to be in London, putting finishing touches. Executives from Mallya's advisor Citibank and top officials of Diageo's advisor JM Financial are also in London.

Law firm Amarchand Mangaldas acted on behalf of United Spirits while Platinum Partners advised Diageo.

One person directly involved in the talks said while everything is ready and good to go, last-minute problems could derail the deal, jeopardising plans for a Friday announcement. He added that Mallya, being a tough and relentless negotiator, could raise some issues requiring further talks between the two parties.

"Mallya flew to London last night," said a person close to the UB Group. "I am in a meeting and it will go on for a few hours," Mallya said in an SMS to ET.

The board meetings of UB Holdings and United Spirits are scheduled to be held in London to discuss the results. UB Holdings holds 18% in United Spirits. "Directors of both these companies have gone to London to attend board meetings," said the UB spokesperson.

Diageo is believed to have called a global town hall meeting of select employees to explain the details of the deal. Some top employees of Diageo have already been informed about the deal.

Mallya will sell a 12% stake to Diageo, which will follow it up by buying the treasury stock of the firm owned by a trust. United Spirits will then make a preferential allotment to Diageo, giving it a 25% stake. This will be followed by an open offer to minority shareholders. Mallya will hold 15% and be its chairman, said a person close to the situation.