Diageo likely to buy 25% stake in United Spirits

British liquor major Diageo is close to acquiring 25% stake in Vijay Mallya-controlled United Spirits. A formal announcement of the deal is likely to happen in two days. Diageo will have to make an open offer to acquire a controlling 51% stake in USL.

The deal is likely to be struck at a price of Rs 1,300-1,500 per share. “Mallya was waiting for a good day to announce the deal. It may happen on October 17,” said a person close to the transaction. Shares of United Spirits rose 4.1% to close at Rs 1,275 on Tuesday. As per the terms of the transaction, Mallya will sell 12% to Diageo and follow it up by buying the treasury stock of the company owned by a trust.

USL will then make a preferential allotment to Diageo, giving the British giant a 25% stake. This will be followed by an open offer to minority shareholders. Mallya will hold around 15% in the company, post deal.

In a rare joint statement on September 26, Diageo and United Spirits said that Diageo is in talks with USL and UB Holdings for a possible investment in USL. People close to the development said that legal firms — Amarchand & Mangaldas for USL and Platinum Partners for Diageo —are drafting the documents.

(Contributed by Sabarinath M)