Dutch brewing company Heineken NV on Monday acquired a 3.21% stake in United Breweries from Diageo-controlled United Spirits (USL) via a block deal. After the deal, Heineken’s stake in India’s largest beer maker will increase to 42%, classifying it as a promoter of United Breweries, while USL will cease to hold any stake in the company.
The deal will fetch Diageo R872 crore – before taking into account the stock-exchange transaction cost and taxes – against its investment of R15 crore. USL offloaded 85 crore shares on the NSE at a price of R1,030 a piece, the company said in a stock-exchange filing.
“The divestment is a part of the process of monetising certain non-core assets of the company,” said USL.
The USL scrip gained R68.60, or 2%, to close at R3,499.55 a share. United Breweries fell R11.05, or 1.08%, to close at R1,014.10 apiece. The Diageo scrip was trading flat-to-positive on the London Stock Exchange.
Earlier this year, the company confirmed its plan to monetise non-core assets to reduce debt and bolster balance sheet. In addition to unlocking value in United Breweries, USL also looked to monetise some of its non-core residential and industrial assets in Mumbai, Bangalore, Kolkata and Hong Kong. The bulk of debt reduction was towards financing taken to acquire Scottish distiller Whyte & Mackay in 2007. Under Diageo, USL divested Whyte & Mackay at a steep loss.
In 2012, Diageo had signed a deal to acquire up to 53.4% stake in United Spirits, in a multi-tiered transaction worth as much as $2.1 billion. Of the total stake purchase, the British alcoholic beverages maker planned to buy a 27.4% stake through a mix of preferential allotment and stake purchase from the UB Group, and the remaining stake from public investors through a mandatory open offer, as prescribed under Sebi’s takeover rules.
The asset monetisation drive was part of Diageo’s plan to merge its India business with USL. Diageo gained complete control over USL’s operations when its protracted takeover bid successfully ended with the acquisition of an additional 26% through an open offer in July 2014, which saw its stake jump to 54.78%.
In January 2015, minority shareholders also approved transfer of licence and distribution agreement to Diageo from USL. The licence to manufacture and distribute Diageo’s brands, such as Johnnie Walker, Smirnoff and VAT 69, were held by Diageo India, which had a sales promotion services agreement with USL. As a result, Diageo’s 15 brands, Smirnoff vodka and Johnnie Walker whiskey, became part of USL’s portfolio of 150 brands.
