Diageo deal sends United Spirits shares 19% higher

Diageo deal sends United Spirits shares 19% higher

Diageo's $2.1 billion deal to acquire 53.4 per cent stake in United Spirits sent shares of Vijay Mallya controlled firm to a new year-high on Monday. U.K. based Diageo is the world's biggest spirits group.

United Spirits shares have nearly tripled this year on takeover hopes. United Spirits shares surged 19 per cent to cross the Rs 1,600 mark in a flat market today. At 09.51 a.m., United Spirits shares traded 18 per cent higher at Rs 1,600 on the BSE.

Mr Mallya will stay on as chairman of United Spirits while Diageo will name the top executive team. United Breweries Holding Limited will keep 14.9 per cent of the company.

Diageo will acquire 27.4 percent of United Spirits from its founders and a packet of new shares for Rs 1,440 - a premium of around 7 percent to Thursday's close.

Diageo will then launch a mandatory offer for another 26 percent on the open market. If it fails to buy outright control, UBHL would vote with Diageo on decisions for four years. UBHL has an option to sell its remaining shares to Diageo from the end of the first full year of control for seven years.

The sharp gains in United Spirits were in contrast to other UB group shares, which traded flat to negative.

Shares in Kingfisher Airlines recovered early losses and traded 2 per cent higher at Rs 13.80 on the BSE. Stocks recovered even though Mr Mallya had de-linked the United Spirits sale and problems at his grounded carrier post the deal.

"We are working towards a comprehensive rehabilitation plan including recapitalisation of the airline. It would be unfortunate if you would try to link this transaction with the airline," he told reporters on Friday.

The Centre for Asia Pacific Aviation has said a fully funded turnaround for Kingfisher would cost at least $1 billion.

United Breweries Holdings Ltd shares fell 5 per cent after a positive start. United Breweries, which makes Kingfisher beer, traded 0.6 per cent lower.

(With inputs from Reuters)