Diageo, UBHL
and USL today announced that Diageo will
take a shareholding in USL, the leading
Indian spirits company.
Diageo plc, United Breweries
(Holdings) Limited and United Spirits
Limited have today announced agreements
under which Diageo would acquire a 27.4%
stake in USL, the leading spirits
company in India. The consideration will
be INR 1440 per share and the total
consideration would be INR 57,254
million (approximately £660 million).
Following completion of these
agreements, Dr Vijay Mallya will
continue in his current role as Chairman
of USL, and UBHL and Dr Mallya will work
with Diageo to build the USL business as
the current consumer trends for
premiumisation accelerate in India. The
agreements are in two parts:
- An agreement to acquire a 19.3%
interest in the current share capital of
USL at a price of INR 1440 per share
from the UBHL group, the USL Benefit
Trust, Palmer Investment Group Limited
and UB Sports Management (two
subsidiaries of USL) and SWEW Benefit
Company (a company established for the
benefit of certain USL employees).
Following this disposal, the UBHL group
would continue to have a shareholding in
USL amounting to 14.9% of current share
capital.
- The shareholders of USL will be asked
to approve the preferential allotment to
Diageo at a price of INR 1440 per share
of new shares amounting to 10% of the
post-issue enlarged share capital of USL.
These agreements trigger an obligation
on Diageo to launch a Mandatory Tender
Offer to the public shareholders of USL.
Diageo has therefore also announced that
it will launch a tender offer to
acquire, at a price of INR 1440 per
share, a maximum of 37,785,214 shares,
which equates to 26% of the enlarged
share capital of USL.
On completion of the share purchases as
described above and in the event that
the tender offer were fully subscribed,
Diageo will hold 53.4% of the enlarged
USL share capital at an aggregate cost
of INR 111,665 million (approximately
£1,285 million). This represents a 20x
multiple of USL’s EBITDA for the year
ended 31 March 2012 and the transaction
would be eps accretive in year 2 and
economic profit positive in year 6
assuming a 12 % WACC.
Diageo and Dr Mallya have entered into a
memorandum of understanding under which
they will form a 50:50 joint venture
which will own United National
Breweries’ traditional sorghum beer
business in South Africa. Diageo’s
investment for its 50% interest in the
joint venture is expected to be
approximately USD 36 million
(approximately £25 million), subject to
adjustment. Diageo and Dr Mallya are
also considering the possibility of
extending this joint venture in order to
maximise opportunities which exist in
certain emerging markets in Africa and
Asia (excluding India).
Paul S Walsh, Chief Executive of Diageo,
said:
‘I am delighted at the opportunity
Diageo has to be part of India’s large
and growing local spirits market. As a
result of the agreements we are
announcing today we will be well
positioned to take the growth
opportunities presented by a spirits
market where growth is driven by the
increasing number of middle class
consumers. USL’s number 1 position in
local spirits together with our growing
international spirits business of
leading brands will enable us to grow
across the consumer space as India’s
increasing number of middle class
consumers look to enjoy premium and
prestige local spirits brands as income
levels rise. The combination of USL’s
strong business with the capabilities
which Diageo brings as the world’s
leading premium drinks company will
ensure that USL continues to lead the
industry in India.
Vijay Mallya’s experience in building
USL to the leadership position it has is
unique in our industry and in his
position, as Chairman of USL, I look
forward to working with him to deliver
value for the shareholders of both USL
and Diageo.
The acquisition of our shareholding in
USL is fully aligned with our strategy
to build our presence in the world’s
faster growing markets and enhances our
position as the world’s leading premium
drinks company.’
Dr Vijay Mallya, Chairman of the UB
Group, said;
'I am very proud of USL and what has
been created over the last 30 years to
bring this company to its pre-eminent
position in India. I have had a long
association with Diageo and therefore I
am confident that this winning
partnership with Diageo provides USL
with the best possible platform for
future growth. I am delighted to remain
part of that journey as Chairman of USL
as we work together to build continued
value for the shareholders of USL and
UBHL.'
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