Bangalore, April 15, 2014
Key brands of United Spirits Ltd
Diageo, one of the world's top drinks businesses, today launched a tender offer to the public shareholders of the Vijay Mallya-led United Spirits Limited (USL) to acquire upto 37,785,214 shares in USL, which represents 26% of USL's fully diluted issued share capital as of today.
A press release from the company said the tender offer would be at a price of Rs 3,030 per share and the total consideration for the increased stake (assuming take-up in full at the announced price) will be Rs 1144.89 crore (approximately £1,132,458,720).
Diageo has launched the offer through Relay B.V., its wholly-owned indirect subsidiary which currently holds 28.78% of the issued share capital of USL, acquired for a total investment of Rs 65,742,163,642 (£726,550,972).
On completion of the offer (assuming full take-up), Relay will hold 54.78% of USL’s issued share capital and will have paid approximately Rs 180,231,362,062 (£1,859,009,692) for its total shareholding in USL.
"In the event the Tender Offer is subscribed in full, the total consideration payable at the announced price for Diageo’s increased stake will represent a 38x multiple of USL’s EBITDA on a consolidated basis for the year ended 31 March 2013 and Diageo's total investment, of INR 180,231,362,062 (£1,859,009,692), in USL is expected to be EP positive in FY2022, the 7th full financial year after completion (assuming a 12 % WACC) and EPS accretive in the year ended 30 June 2016," the release said.
USL is the leading spirits producer in India. On a consolidated basis, in the financial year ended 31 March 2013, USL earned net revenue of Rs 105,980 million (£1,048.3 million) from operations, EBITDA of Rs 13,548 million (£134.0 million) and losses after tax of Rs 1,050 million (£10.4 million). USL had Rs 163,849 million (£1,621 million) of total assets on a consolidated basis as at 31 March 2013.
The offer will be governed by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011 and applicable law.
The offer price represents a premium of 22.5% to the price at which Diageo last acquired USL shares on 31 January 2014; and 20.0% to the 60 day VWAP for USL (SEBI regulatory floor price).
Diageo will fund the consideration payable under the offer through existing cash resources and debt.
The release said the offer is not subject to any condition regarding levels of acceptance.
Diageo had, in November 2012, announced that it had reached agreements under which it would acquire 27.4 per cent stake in USL at a consideration of Rs 1440 per share and a total consideration of Rs 57,254 million (approximately £ 660 million). It had also announced that it would launch a tender offer to acquire, at a price of Rs 1440 per share, a maximum of 37,785,214 shares, which equates to 26% of the enlarged share capital of USL.
The sale was expected to help Mr Mallya clear USL's debt and also revive his beleaguered airline, Kingfisher.
The company said today it had completed the acquisition of 21,767,749 shares (14.98%) in USL at a price of INR 1440 per share and for total consideration of RS 31.3 billion (£342 million), including 10,141,437 shares (6.98%) from UBHL, which is now the subject of a court case.
Separately, Diageo continues to pursue completion of the acquisition of an additional 3,459,090 USL shares (representing approximately 2.38% of the share capital of USL) under the SPA from the USL Benefit Trust.
"Currently certain lenders to USL are refusing to release security that they hold over those shares notwithstanding that they have been repaid in full. USL is taking steps, including proceedings before the High Court, to expedite the release of the security. As previously disclosed, if it is not ultimately possible to complete the acquisition in relation to these shares, they would instead continue to be held by the USL Benefit Trust subject to an undertaking that the trustees would only vote the shares at the direction of USL," it added.