India's capital markets regulator may ask Diageo PLC (DEO) to
modify its agreement with the UB Group to acquire a majority stake
in United Spirits Ltd. (532432.BY) at 1,440 rupees ($26.5) a share,
the Economic Times reported Friday, citing an unnamed source.
The Securities and Exchange Board of India is not happy with a
put option that allows the UB Group to sell any or all of the
remaining stake at the same price within seven years.
The report said SEBI says the put option resembles a futures
contract, and that it violates Indian merger and takeover
rules.
Spokespersons for SEBI and the UB Group couldn't be immediately
reached for comment, while Diageo didn't reply to an email.
United Spirits is the flagship of the UB Group, controlled by
Vijay Mallya. The group also runs United Breweries Ltd., the maker
of India's largest-selling Kingfisher brand of beer, and ailing
Indian carrier Kingfisher Airlines Ltd. (532747.BY).
In November, Diageo said it would buy a 19.3% stake in United
Spirits from United Breweries Holdings and other related firms. It
said it would buy a further 10% by subscribing to a preferential
allotment of new shares by United Spirits.
The transaction would first lead to Diageo owning a 27.4% stake
in the enlarged share capital of United Spirits, following which
the U.K. firm would make an open offer at 1,440 rupees a share for
another 26%, according to Indian market rules.
United Breweries (Holdings) Ltd. (507458.BY) and Mr. Mallya's
firms owned a total 27.8% stake in United Spirits as at Dec. 31,
stock exchange data showed.
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