United Spirits hits highest level since Oct 10 as SEBI clears Diageo's open offer

NEW DELHI: United Spirits India Ltd surged nearly 4 per cent to its highest level seen in October 10 at 1921.55, after market regulator SEBI cleared for an open offer to acquire 26 per cent stake from public shareholders of the UB group firm.

At 01:15 pm, United Spirits was trading 3.5 per cent higher at Rs 1921.55. It touched a high of Rs 1929.80 and a low of Rs 1836.50.

Global liquor giant Diageo is now a step closer to complete its Rs 11,167-crore takeover of majority stake in United Spirits.

As part of the deal for purchase of 53.4 per cent stake in UB group’s United Spirits, Diageo has made a Rs 5,441-crore open offer for purchase of 26 per cent stake in the company from non-promoter shareholders.

The proposed open offer for an additional 26 per cent stake in USL entails purchase of about 3.8 crore shares at a price of Rs 1,440 per share, totalling Rs 5,441 crore, by Relay BV, a wholly-owned subsidiary of Diageo.

According to regulations, any acquisition of 25 per cent or more stake in a listed company triggers a mandatory open offer for purchase of additional 26 per cent stake from the public shareholders and the same needs to be cleared by the market regulator.

“The deal, however, is still awaiting a green signal from fair trade regulator CCI (Competition Commission of India), although the concerned parties (Diageo and UB group firms) have submitted certain clarifications sought from them,” PTI reported.

“Sebi issued its final observations on the open offer, which are necessary for the offer and the deal as a whole to go through, on January 31, 2013 and the same have been communicated to Diageo,” added the report.

Most brokerages are pegging turnaround in the company post Diageo’s takeover, which should happen in near term. Earlier in the week Diageo has readied plans to take charge at United Spirits (USL), where it is buying a more than $2-billion stake in multiple stages.

Kim Eng maintains ‘buy’ on the counter and remains upbeat about the UNSP’s prospects under Diageo’s ownership, which will cut debt substantially and bolster the portfolio of premium alcohol brands.

Other brokerages which are upbeat on the stock include JPMorgan, Credit Suisse and Nmura.

JPMorgan maintains an ‘overweight’ rating on the stock with a target price of Rs 2265, while Credit Suisse has an ‘outperform’ rating on the stock with a target price of Rs 2400.

Nomura has a ‘buy’ rating on the stock with a target price of Rs 2200 while Macquarie maintains ‘underperform’ rating on the stock with a target price of Rs 1165.