SEBI clears Diageo’s open offer for United Spirits

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Diageo Plc has got SEBI’s clearance for an open offer to acquire 26 per cent stake from public shareholders of United Spirits Ltd of the Vijay Mallya-led UB group.
Diageo Plc has got SEBI’s clearance for an open offer to acquire 26 per cent stake from public shareholders of United Spirits Ltd of the Vijay Mallya-led UB group.

The Diageo-United Spirits deal has inched closer to reality with Securities and Exchange Board of India issuing its final observation on the open offer.

To be concluded, the deal now requires clearance from the Competition Commission of India.

According to SEBI’s Web site, the final observation issued on January 31 on the draft open offer is for acquiring 26 per cent public shareholding with total estimated value of Rs 5,441.07 crore. This is part of the deal for purchase of 53.4 per cent stake in Vijay Mallya-led UB group’s United Spirits Ltd (USL) at an estimated cost of over Rs 11,000 crore.

The Web site has not published its observation in detail.

According to the draft, the offer has been made by Relay BV together with Diageo plc, Diageo Finance plc, Diageo Capital plc and Tanqueray Gordon and Company Ltd as the persons acting in concert.

Relay, Diageo Finance, Diageo Capital and Tanqueray are wholly-owned subsidiaries of Diageo plc. 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 a share.

As part of the deal, Diageo will acquire 27.4 per cent stake for Rs 5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. Besides, it had offered to acquire another 26 per cent stake through an open offer for public shareholders.

It may be recalled that 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 it needs to be cleared by the market regulator.

The deal was first announced in November last. Earlier, the regulator was not comfortable with certain provisions of the proposed offer, including those related to preferential allotment of shares, as it feared that the minority shareholders may be at a disadvantage under the existing terms of the deal. Now, it appears that such a concern has been fairly addressed, which resulted in its final observation.

(This article was published on February 5, 2013)
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