Japanese spirits giant Suntory is believed to be interested in acquiring a 10-15% stake in Vijay Mallya’s United Spirits (USL) for about $600 million. USL is already in preliminary talks with multinational drinks giants Diageo, Pernod Ricard and Bacardi for a stake sale.
A potential sale could value USL, the world’s third largest spirits marketer by volume, at around $6 billion. A top USL source confirmed Suntory’s interest “for a strategic alignment,” adding that details of Suntory’s interest are still being gathered. In November last, ET had first reported on Mr Mallya’s move to offload shares in the flagship spirits company.
“There are several interested players who know it is a one-time chance to get their distribution act right in India. And I will be looking at unlocking maximum shareholder value,” Mr Mallya told ET. The USL stock closed at Rs 1,313 on Wednesday, valuing a 15% stake at around $430 million.
A deal, if it goes through, could be the biggest overseas venture for the 110-year old Suntory, arguably the most storied alcoholic beverage maker in Asia. A deal with USL will give it access to a strong Indian distribution network. USL, which caters to over 55% share of domestic spirits consumption, is expected to kick off a formal process to induct a strategic investor soon.
Mr Mallya is looking at unlocking value from 13.7 million treasury stock — banked in a trust — that came out of the overlapping capital from the merger of group companies. The treasury stock accounts for 14-15% of the company’s share capital, and placing these with a strategic investor will not dilute the promoter stake, which currently stands at 37%.
Diageo and Pernod Ricard are already engaged in discussions with Mr Mallya, but there have been concerns about “the lack of a clear horizon” following the deal. It is believed that potential suitors are awaiting clarity on management rights, if any, which USL is willing to offer.
Further, unlike the other three suitors, Suntory has no presence in the highly regulated Indian spirits market. In 2001, Mr Mallya had inducted Scottish & Newcastle as a strategic investor in his beer business at Rs 575 per share, against the prevailing stock price of Rs 130-140, industry analysts pointed out.
Separately, while talking to media in Bangalore on Wednesday, Mr Mallya said he was indeed in discussions with global majors, confirming an earlier ET report.
Diageo was widely seen as a front-runner to pick up the stake, but it subsequently emerged that USL has received expressions of interest from Pernod Ricard and Bacardi as well. While no investment bank has been mandated for the unfolding strategic divestment, at least three banks are seen vying to take the process formal.
Source: Economic Times