British branded premium alcoholic beverages group Diageo Plc (LON:DGE; NYSE:DEO) is negotiating a potential deal to buy a stake in Indian sector player United Spirits Limited (BOM:532432), the pair said on Tuesday.
The statement, follows an earlier Bloomberg report citing sources as saying that talks over a deal were advanced and an agreement could be reached by October. According to those sources, Vijay Mallya, United Spirits’ chairman controlling 28% in the spirits and wines maker, needs cash to help support his struggling, loss-making carrier Kingfisher Airlines Ltd.
Mallya will remain a United Spirits shareholder under the terms being discussed with Diageo, the report said, adding that the deal could give the British group the right to name the majority of United Spirits’ board members, including the chairman.
Nomura (TYO:8604) analyst Ian Shackleton in London told Bloomberg that a transaction with United Spirits would bring a large platform in Indian spirits to Diageo, allowing it to achieve strong profits from sale of scotch in the country, where talks are ongoing to reduce tariff barriers.
In their joint statement today, Diageo and United Spirits gave no further details about their discussions, apart from saying that they were not certain to lead to a transaction.
Diageo is the maker of brands including Johnnie Walker, Crown Royal, J&B, Buchanan’s, Windsor and Bushmills whiskies, Smirnoff, Ciroc and Ketel One vodkas, Captain Morgan, Baileys, Jose Cuervo, Tanqueray and Guinness. The group is present in India with a distribution network.
