USL minority shareholders okay Diageo licensing deal

India’s largest alcoholic beverage manufacturer United Spirits (USL) on Saturday said that its minority shareholders have approved a proposal to enter into licensing and cost-sharing agreements with certain subsidiaries of its parent company Diageo, which was rejected earlier the previous year.

A special resolution was approved by the shareholders “with requisite majority” at an extraordinary general meeting held on Friday, the company said in a filing to the BSE. 

The company said that 76.33 per cent of the minority shareholders approved its proposal, a tad over the 75 per cent requirement.

Although the promoter and promoter groups are required to abstain from voting, the filing said that United Breweries (Holdings), holding 2.90 per cent shares of the United Spirits and Kingfisher Finvest India, holding 1.14 per cent of the share capital, have exercised their votes in favour of the special resolution.

“Pursuant to the terms of the extra general meeting notice, the scrutiniser has invalidated the votes exercised by these entities,” it added.

The proposal included entering into licence for manufacture and sale agreements, distribution, cost sharing and other agreements by the company with its holding company Diageo, the filing added.

The approval by the minority shareholders comes nearly two months after they had rejected as many as 9 of 12 resolutions, including some pertaining to pacts with entities connected to erstwhile promoter Vijay Mallya.

Shareholders at the November 28 EGM had rejected approval to a loan agreement dated July 3, 2013, between USL and United Breweries (Holdings) Ltd. They also did not approve pacts dated September 30, 2011, and December 22, 2011, between USL and and UBHL that required UBHL to sell to the company certain immovable properties, a BSE filing said.

Other resolutions that were defeated with requisite majority include approval of a services agreement dated July 3, 2013, between USL and Kingfisher Finvest India, approval of a sponsorship pact dated June 11, 2013, between USL and United Racing & Bloodstock Breeders, approval of a sponsorship pact between USL and United Mohun Bagan Football Team.

Some resolutions had to get shareholders’ nod with new norms on related-party transactions coming to effect.

The three resolutions that were passed related to erosion of net worth of the company, sales promotion agreement and trademark licence pact.

USL is now controlled by world’s largest spirits maker Diageo, which had acquired an additional 26 per cent shares in USL for Rs 11,448.91 crore in July with an aim to take its total stake in the Indian firm to 54.78 per cent.

Liquor baron Vijay Mallya has been recently reelected as non-executive director and chairman of United Spirits.