United Spirits mulls strategic options
This could be Diageo’s chance to get its foot into the door at India’s leading spirits company United Spirits (USL), as Vijay Mallya, the Indian beer and drinks baron, who owns a 28 percent stake in USL, is struggling to save his troubled Kingfisher Airlines.
Previously, in 2009, Diageo sought to buy a stake in USL but failed.
According to media sources the world’s number one drinks company Diageo, which owns brands like Johnnie Walker whisky and Smirnoff vodka, is again holding talks with USL.
Fresh expectations of a deal have mounted in recent months all the while Mr Mallya is fighting to protect his personal holdings in the spirits and beer business from the near-collapse of his Kingfisher Airlines. Kingfisher has been saddled with a huge debt load and in November 2011 was forced to reduce operations massively. It currently operates 12 aircraft from the earlier 66, and has reduced daily flights to close to 90 from the earlier 360, Indian media reported in August 2012.
Mr Mallya seems to be considering all options to save his beleaguered airline. In early September 2012 Indian media reported rumours that Mr Mallya may sell up to 27 percent in USL or offload up to 48 percent in its flagship whisky brand Whyte & Mackay (W&M).
Unnamed sources say that Mr Mallya is also holding talks with private equity players to offload a stake in W&M. USL had bought two Scottish distilleries— Whyte and Mackay Ltd and Bouvet Ladubay in 2007 and 2006, respectively.
If Mr Mallya were to sell a stake in W&M, that could alleviate concerns raised by UK monopoly watchdogs over a Diageo-USL tie-up. Since Diageo and USL have large market shares in the Scotch whisky segment, the regulator fears a deal could give Diageo a near-monopoly in the segment.
In August this year, Diageo’s CEO Paul Wash played down the likelihood of a deal between Diageo and USL. “Ultimately Mr Mallya will decide, and I don’t think he has any appetite at this stage to cede control,” Mr Walsh was reported as saying.
Perhaps circumstances will force Mr Mallya to change his mind?
