Private equity giant Kohlberg Kravis Roberts (KKR) and Diageo may buy a chunk of equity in the Vijay Mallya-led United Sprits, India’s largest liquor marketer and the parent of Scottish distiller Whyte & Mackay (W&M), a person close to the development said. The two firms could buy 10% and 14.99%, respectively, in the company.
Two simultaneous deals are being worked out in such a manner that they do not attract the provisions of the Securities and Exchange Board of India’s (Sebi) takeover code. As per the talks which are going on, KKR could sell its shares to Diageo at the time of exit. The proposed investment structure will also possibly help Diageo tackle competition laws in EU, people close to the talks added.
Any substantial stake buy into USL is expected to raise monopoly hackles for Diageo, makers of Johnnie Walker and Smirnoff in Scotland, as it gives the world’s largest drinks company indirect control over W&M, one of the world’s leading bulk scotch suppliers.
“We are exploring this possibility, but there is still a long way to go,” a senior UB official said. Another company source said the ongoing talks with Diageo and KKR “are independent discussions”. A Diageo spokesperson said the company has not been able to formalise any structure for a deal even as it confirmed ongoing talks with USL. ET in March this year broke the news on KKR’s interest in USL, with the global media last week reporting the PE giant’s entry into the ongoing deal-making at the Indian liquor major controlling 55% share of the domestic market.
KKR has been bullish on the beverage space and effected a $1.8-billion buyout of Oriental Brewery in Korea from Anheuser-Busch InBev earlier this month. In context, it must be mentioned that KKR is not new to scripting deals in tandem with partners. Former Citibank honcho Sanjay Nayar heads KKR’s India operations, and Citi was one of the key lenders for Mr Mallya’s $1.18-billion acquisition of W&M in 2007. Mr Mallya has been holding discussions with Diageo for nearly two years even though the transaction appears to be going back and forth over structural and management control issues.
But, Diageo CEO Paul Walsh and Mr Mallya — both enjoy a personal rapport — have been persisting with the discussions.
Meanwhile, USL has also received informal interests from Bermuda-based spirits major Bacardi and other private equity firms. Mr Mallya earlier told ET that he was not averse to Diageo acquiring more than 15% stake in his company — as long as it did not exceed his own holding of around 35%.
