Diageo Said to Weigh Raising Stake in India’s United Spirits

(Bloomberg) -- Diageo Plc, the maker of Johnnie Walker scotch and Smirnoff vodka, is considering increasing its majority stake in Indian whiskey producer United Spirits Ltd., people familiar with the matter said.

Diageo is weighing an open offer to the other shareholders in India’s biggest spirits maker, according to the people, who asked not to be identified because the information is private. Diageo has a 55 percent stake in United Spirits, which has a market value of about $4.5 billion, according to data compiled by Bloomberg. No final decisions have been made and the company may decide against buying more shares, they said.

The British company has been considering an increased stake for several months, the people said. The decline in United Spirits shares, which have fallen 22 percent in the last 12 months, has made such a move more attractive now, one of the people said.

A representative for United Spirits directed questions to Diageo. Diageo declined to comment.

Under Indian stock market regulations, Diageo could raise its stake to just under 75 percent without triggering a delisting offer. The current value of a 20 percent stake in United Spirits is about $900 million.

Increasing Stake

United Spirits shares rose 6.5 percent to close at 2,085.15 rupees in Mumbai on Tuesday. Diageo fell 2.8 percent to 2,134.50 pence at 1:51 p.m. in London.

The U.K. distiller agreed to acquire a stake in United Spirits, the maker of McDowell’s No. 1 whiskey and Romanov vodka, in 2012. It bought a further 26 percent stake through an open offer in 2014 for 3,030 rupees a share raising its holding to 54.8 percent.

The parent company had been at odds with United Spirits’s former Chairman Vijay Mallya, asking the Indian businessman to resign in 2015 after an internal investigation found that company funds were diverted to other entities under his control. Mallya initially refused to quit, denying any wrongdoing. The two sides reached an agreement last year that paid the executive $75 million not to compete or interfere with the company for five years, and he resigned with immediate effect in February.

--With assistance from P R Sanjai Ameya Karve and Nupur Acharya To contact the reporters on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net, Ruth David in London at rdavid9@bloomberg.net, Thomas Buckley in London at tbuckley25@bloomberg.net. To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Matthew Boyle at mboyle20@bloomberg.net, Amy Thomson, Paul Jarvis