Mallya says Diageo owes him; liquor major contests claim

London-based liquor major Diageo has said that it will “vigorously” contest the claim by Vijay Mallya, the Chairman of its Indian subsidiary, United Spirits Ltd (USL), who has accused the parent of failing to enter into a joint venture with him for emerging markets.

A fresh row has broken out between Mallya and Diageo following the latest interim financial report by the London-based company, which noted that the USL Chairman believes he has certain claims against Diageo for its failure to enter into a joint venture with him in respect of certain emerging markets in Africa and Asia (excluding India) and to provide significant financial benefits to him.

However, Diageo pointed out that only the “possibility” of such a deal was discussed when it entered into an initial acquisition deal with USL alongside the details on the MoU for setting up a joint venture to own United National Breweries’ traditional sorghum beer business in South Africa (UNB joint venture), the report said. “That announcement noted that it was not certain whether the emerging markets joint venture would be established or, if so, on what basis.” On April 2, 2015, Diageo agreed to acquire the remaining 50 per cent of the UNB joint venture, and this acquisition was completed on May 29, 2015 at which point UNB became a wholly owned Diageo group subsidiary.

The report said Diageo believes, consistent with its prior disclosures, that it has no outstanding obligations to Mallya as regards the establishment of an emerging markets joint venture or the provision of financial benefits.

“Diageo would contest vigorously any such claim that may be brought by Mallya whether in the context of a counter-indemnity claim for DHN’s liability under its guarantee of the Watson facility, a company affiliated with Mallya or otherwise.”

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