Diageo Deal for India’s United Spirits Hits Another Bump

December 22, 2013 Leave a comment

Diageo Deal for India’s United Spirits Hits Another Bump

Diageo, United Breweries, to Appeal Court Decision

ERIC BELLMAN

Dec. 21, 2013 8:21 a.m. ET

An Indian court has annulled the sale of some shares of India’s United Spirits Ltd.532432.BY +0.71% to London-based liquor giant Diageo DGE.LN -0.31% PLC, further delaying Diageo’s big bet on India’s drinkers.Both Diageo and United Breweries Holdings Ltd 507458.BY -0.40% , which sold it the United Spirits shares, said they are still studying the Friday decision by the High Court of the southern state of Karnataka, but they plan to appeal.

“We will take all necessary steps to protect Diageo’s interests as well as our own,” said billionaire Vijay Mallya, who heads the Indian brewer that sold the shares.

Since last year, Diageo has been trying to acquire a controlling stake in United Spirits, but the acquisition has run into a number of regulatory and legal barriers.

The latest trouble comes after companies that lent money to United Breweries went to court to stop it from selling its United Spirits shares to Diageo because it still owes them money. United Breweries was a guarantor for some of the debt left by Kingfisher AirlinesLtd. 532747.BY +2.63% , another group company that has been grounded since last year, unable to pay off its loans.

Diageo said that only part of the 26% stake it now owns in United Spirits is affected by the court’s decision.

“We do not believe that there are any grounds for declaring the sale of the [6.9% of] shares in United Spirits Ltd. purchased by Diageo on 4 July 2013 from United Breweries (Holdings) Ltd. as void.” the company said in a statement.

“We are disappointed to hear that the court has overruled the previous order of the High Court of Karnataka,” which approved the share sale, it said.

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