Diageo on Thursday said it will acquire the remaining 50% stake in Vijay Mallya’s traditional sorghum beer company in South Africa, making it a wholly owned subsidiary. The British liquor maker said it will acquire the stake from Pestello Investments, a firm affiliated to Mallya, for an initial payment of $22 million and a potential earn-out payment.
Diageo had initially picked up 50% in United National Breweries, a maker of a traditional South African beer called ‘Umqombothi’ in January 2013 for $36 million. Incidentally, at the time, Diageo had said it was considering the possibility of extending the joint venture to tap opportunities in emerging markets in Africa and Asia, excluding India. A spokesman for the UB Group said Mallya was unavailable for comment as he was travelling abroad.
“Diageo will acquire this further interest from Pestello Investments Inc for an initial payment of $22 million and a potential earn-out payment of up to $14 million,” Diageo said in a statement. The United National Breweries transaction, which will require a consent from the South African competition authority, is expected to be completed in this fiscal.
“Once completed, this transaction will give Diageo control of the leading traditional sorghum beer business in South Africa, including the ability to make investment decisions to support the continued growth of United National Breweries’ brands in the sorghum beer category,” Diageo said.
Diageo’s deal to pick up the initial 50% stake in the South African company had been announced alongside its stake purchase in Mallya’s flagship company United Spirits (USL) in 2012. Diageo now wields control over USL with a 54.78% stake in the liquor firm while Mallya’s shareholding is down to 4.09%.
Mallya’s exit from his overseas venture comes at a time when another of his companies back home is being eyed by rivals. The Saroj Poddar-led Zuari Fertilisers and Chemicals is gearing up to launch an open offer for Mallya’s Mangalore Chemicals and Fertilisers (MCF) after having received approval from the Competition Commission of India earlier this week. The fertiliser company has been in the midst of a takeover battle for the past couple of years as Mallya’s UB Group came under pressure from creditors of the group’s now-defunct carrier Kingfisher Airlines.