Diageo buys United Spirits shares worth Rs 866 crore, hikes stake to 29%

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Diageo raises stake, United Spirits shares jump 1.39 per cent and end the day at Rs 2,474.45. Reuters Diageo raises stake, United Spirits shares jump 1.39 per cent and end the day at Rs 2,474.45. Reuters
SummaryUnited Spirits shares have been acquired by Diageo through its group entity Relay BV

Relay BV, the Dutch arm of the world's biggest spirits maker Diageo, increased its stake in United Spirits — the flagship company of Vijay Mallya-led UB Group — through an open market transaction on Friday. It purchased 35 lakh shares, or 2.41% stake, in United Spirits through a bulk deal at an average price of R2,474.45 per share. Foillowing this transaction, valued at R866 crore, UK-based Diageo now owns 28.8% in United Spirits. As of December 2013, Relay held 26.37% in United Spirits.

The United Spirits stock closed at R2,474.45, up R33.95, or 1.39%, in Friday's trade.

The open market operation seems to be counterbalancing a sell trade in which Oppenheimer Funds exited 36.42 lakh shares of United Spirits. The fund held 39.68 lakh shares, or 2.73%, in the Indian spirits maker at the end of 2013, exchange data show.

In 2012, Diageo had announced it intends to buy 53.4% stake in United Spirits through promoters and other shareholders, valuing the deal at R11,166.5 crore. However, it could garner only 25.02% for a total consideration of R5,235.85 crore due to a tepid response to its open offer.

However, one of its share purchase transactions, involving the purchase of a 6.98% stake from Mallya’s holding company, United Breweries Holdings (UBHL), was struck down last month by the Karnataka HC while hearing a petition filed against UBHL by its creditors. Diageo’s appeal against Karnataka HC ruling is scheduled to come up for hearing in the Supreme Court on Friday.

Separately, in a conference call addressing analysts after announcing the December quarter numbers, Diageo management said the company is set to consolidate its Indian operations starting the coming fiscal (2014-15).

While acknowledging the deployment of the company's compliance and governance policies, including the rejig of the board of directors of United Spirits, Diageo management said they were planning to appoint a new CEO by April 2014.

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