The Hindu Business Line : United Spirits to raise Rs 905 cr via stake sale by Shaw Wallace

Bangalore, June 30 The country’s largest liquor maker United Spirits has said that Shaw Wallace has sold its entire 10.27 per cent stake in the company through open market transactions, helping United Spirits to raise about Rs 905 crore. The money will go to United Spirits because it bought Shaw Wallace.

The UB Group President and CFO, Mr Ravi Nedungadi, told Business Line the shares of USL held by Shaw Wallace also comprised treasury stocks. After the merger with United Spirits, the shares moved into United Spirits’ benefit trust. He pointed out that Shaw Wallace could cease to exist from next week.

The transaction, through two block deals, was for 10.3 million shares at the BSE and the NSE. The buyers include DWS Invest BRIC Plus, Emerging Markets Growth Fund Inc and Reliance Growth Fund.

The entire proceeds of the sale will be applied towards prepayment of the acquisition loan taken for the acquisition of Whyte & Mackay in 2007, said a press statement from the company. With this and the accelerated payments already made, the company would have repaid about half of the original loan.

The company will also save an estimated Rs 85 crore a year on interest costs, thus boosting the earnings and earnings per share. Besides, it has other options to raise additional funds, including a choice of sale of balance treasury shares (8.35 million), qualified institutional placement, global depositary receipt, and PE funds to raise further equity for additional de-leveraging.

In a presentation to the investors sometime ago, United Spirits said it plans to sell up to 49 per cent stake in Whyte & Mackay to a strategic investor. With Tuesday’s deal, the company has the luxury of “doing a strategic transaction with the best possible partner in due course without liquidity pressure,” said its press statement.

The company is also in talks with the world’s largest liquor maker, Diageo, for a joint venture. A Diageo spokesperson had told Business Line earlier that both the companies were yet to find a structure for the talks to make any progress.

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