Leading brewer and distributor
) has increased its ownership in United Spirits Limited by a
further 14.98% for a cash consideration of £344.2 million. This
acquisition takes Diageo another step toward its goal of
acquiring 27.4% ownership in this leading spirit company of
In Nov 2012, Diageo and United Spirits Ltd. announced an
agreement under which Diageo will acquire a 53.4% stake in the
latter for £1.285 billion ($2.05 billion). This will allow Diageo
to gain a foothold in the fast-growing alcohol market in
Under the agreement, initially Diageo was to buy 27.4% stake
in United Spirits for INR 1440 per share ($26.32 per share),
amounting to a total consideration of £660 million ($1.05
billion), and make a tender offer for the remaining 26%.
Diageo will finance the acquisition, slotted to be closed in
first quarter of fiscal 2013, through existing cash and debt. The
joint venture received a clean bill of health from the fair trade
watchdog Competition Commission of India (CCI).
Dr. Vijay Mallya, the Indian entrepreneur and owner of United
Spirits, needs sufficient cash to bail his Kingfisher Airlines
out of bankruptcy. While the acquisition will help reduce the
debt, it will also provide bright opportunities for the company.
Following the acquisition, Dr. Mallya will continue in his
current capacity as Chairman of United Spirits.
In Dec 2012, the shareholders of United Spirits Limited
approved the preferential allotment amounting to 10% of the
post-issue enlarged share capital to Diageo. It also acquired
some additional shares during the same period. With the recent
takeover, Diageo now owns 25.02% of United Sprits
Diageo upgrades its products through continuous innovations.
Recently, keeping in view the bright future of the luxury alcohol
category in the global luxury market, the company launched a
limited edition of Johnnie Walker Blue Label crafted by Alfred
Dunhill. The new product joins the Richemont luxury brand of blue
scotch owned by the company.
Diageo has a leading position both in the beer and vodka markets
with a strong portfolio of globally recognized flagship brands,
including Smirnoff, Johnnie Walker, Captain Morgan, Baileys and
DEO currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider:
Others players in the same industry which look attractive at
the current levels include
Fortune Brands Inc.
Flower Foods Inc
), all carrying a Zacks Rank #1 (Strong Buy).
DIAGEO PLC-ADR (DEO): Free Stock Analysis
FORTUNE BRD H&S (FBHS): Free Stock Analysis
FLOWERS FOODS (FLO): Free Stock Analysis
RESTORATION HDW (RH): Free Stock Analysis
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