United Spirits shares hit 52-week high on hopes of deal with Diageo

MUMBAI: Shares of United Spirits extended overnight gains and hit 52-week high on reports that Vijay Mallya have may sealed a deal with Diageo giving the British company complete control over India's largest spirits producer, the makers of McDowell and Bagpiper whiskies.

“As per the terms of the deal, Diageo will buy more than 25 per cent 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 per cent. The British company is expected to pay Rs 1,500-1,600 per share. Diageo will pay around $2 billion for buying a 51 per cent stake,” the Economic Times report said.

The company is also slated to announce its quarterly results today.

“United Spirits’ 2Q EPS growth would be subdued Q-o-Q owing to a high base, led by strong earnings growth last quarter. We expect earnings growth to be muted Y-o-Y due to increase in interest cost on debt mobilized to fund investment in distillation and inventory,” said Kim Eng Securities report.

“For FY13, we forecast EPS growth of 160 per cent to Rs 39.2 supported by reducing raw material cost and cost savings from in-house distillation,” the report added.

The brokerage maintains HOLD recommendation on the stock with a target price of Rs 1,108/share based on ‘sum-of-the-parts’ valuation.

Shares of Kingfisher Airlines also gained on expectations that stake sale in United Spirits would lead to funds inflow into the cash-strapped airlines.

Kingfisher Airlines was at Rs 13.35, up 3.57 per cent on the BSE. It touched a high of Rs 13.53 and a low of Rs 13.15 in trade today.

United Breweries gained 3.23 per cent to Rs 135.90 on the BSE. The scrip touched a high of Rs 138.20 and a low of Rs 134 in trade today.