Fri, 09 Nov 2012 16:45:00 GMT | By Reuters

Diageo, United Spirits strike deal

Mumbai: Diageo Plc is set to buy a controlling stake in liquor baron Vijay Mallya's United Spirits in a deal worth over $2 billion, a memo shows, giving the world's biggest spirits group a bigger slice of a fast-growing market.

Diageo strikes $2 billion deal with Mallya's United Spirits (© Reuters)

The purchase would be the biggest inbound Indian M&A deal since British oil firm Cairn Energy Plc's sold a majority stake in its Indian business to Vedanta Resources Plc last year. The Diageo deal concludes an on-again, off-again courtship that began in 2008.

Under the terms of the deal, Diageo would eventually get a 53.4 percent stake in United Spirits, although Mallya would remain as chairman and retain a material shareholding which the memo did not specify.

A United Spirits spokesman did not respond to calls seeking comment, while Diageo officials were not available for comment.

The agreement comes after months of haggling and will ramp up Diageo's presence in the world's largest whisky market. The deal would also help Mallya gain much-needed cash to reduce the debt borned by United Spirits and free up funds to revive his grounded Kingfisher Airlines.

"Some of the Mallya group companies have been in turbulence for some time. This is his final opportunity to revive the fortune of the group," said Jagannadham Thunuguntla, head of research at SMC Investments and Advisors Ltd in New Delhi.

Shares in Mallya-controlled companies rose after the Reuters story, with Kingfisher gaining 4.7 percent. United Spirit was up 1.5 percent and United Breweries Holdings Ltd was 2.6 percent higher. By contrast, the benchmark Sensex fell 1 percent.

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