Diageo launches tender offer for up to 26% of USL

Posted: 15 April 2014 | Diageo | No comments yet

Diageo plc has launched a tender offer to the public shareholders of United Spirits Limited to acquire up to 37,785,214 shares in USL…


Diageo plc has today launched a tender offer to the public shareholders of United Spirits Limited (“USL”) to acquire up to 37,785,214 shares in USL, which represents 26% of USL’s fully diluted issued share capital as at 15 April 2014 (the “Tender Offer”). The Tender Offer will be at a price of INR 3,030 per share and the total consideration for the increased stake (assuming take-up in full at the announced price) will be INR 114,489,198,420 (approximately £1,132,458,720). Diageo has launched the Tender Offer through Relay B.V. (“Relay”), a wholly-owned indirect subsidiary of Diageo. Relay currently holds 28.78% of the issued share capital of USL, acquired for a total investment of INR 65,742,163,642 (£726,550,972). On completion of the Tender Offer (assuming full take-up), Relay will hold 54.78% of USL’s issued share capital and will have paid approximately INR 180,231,362,062 (£1,859,009,692) for its total shareholding in USL.

In the event the Tender Offer is subscribed in full, the total consideration payable at the announced price for Diageo’s increased stake will represent a 38x multiple of USL’s EBITDA on a consolidated basis for the year ended 31 March 2013 and Diageo’s total investment, of INR 180,231,362,062 (£1,859,009,692), in USL is expected to be EP positive in FY2022, the 7th full financial year after completion (assuming a 12 % WACC) and EPS accretive in the year ended 30 June 2016.

Important information

The important information set out below comprises information regarding:

  • USL
  • The Tender Offer, including its timing
  • The Shareholders’ Agreement
  • Other important information
  • Status of proceedings in respect of the earlier USL Transaction


USL is the leading spirits producer in India. On a consolidated basis, in the financial year ended 31 March 2013, USL earned net revenue of INR 105,980 million (£1,048.3 million) from operations, EBITDA of INR 13,548 million (£134.0 million) and losses after tax of INR 1,050 million (£10.4 million). USL had INR 163,849 million (£1,621 million) of total assets on a consolidated basis as at 31 March 2013.

Tender Offer

The Tender Offer will be governed by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (the “Regulations”) and applicable law. The applicable Indian takeover regulator is the Securities and Exchange Board of India (“SEBI”).

The Tender Offer will be made in accordance with the Regulations and on the terms and conditions set out in the public announcement made today in India and the detailed public statement and letter of offer that are to be released by Diageo and Relay in India. Diageo and Relay have obtained the required competition approvals, and the completion of the Tender Offer is not conditional on receipt of any competition approvals in India or elsewhere.

The Tender Offer has been announced at the following price:

for each USL Share                                           INR 3,030 in cash

That price represents a premium of:

  • 22.5% to the price at which Diageo last acquired USL shares on 31 January 2014; and
  • 20.0% to the 60 day VWAP for USL (SEBI regulatory floor price).

Diageo will fund the consideration payable under the Tender Offer through existing cash resources and debt.

The Tender Offer is not subject to any condition regarding levels of acceptance. Accordingly, if the Tender Offer is not subscribed in full, all USL shares tendered would, subject to the terms and conditions of the Tender Offer, be acquired by Relay. If the Tender Offer is over-subscribed, the tendering USL shareholders will be scaled back and entitled to sell such number of shares calculated on a pro rata basis to the shares tendered in the Tender Offer.

Further important information relating to the Tender Offer, and certain implications of the SEBI review process required to confirm its terms and conditions (including price), are set out in the “Other Important Information” section.

Indicative Abridged Tender Offer Timetable (see note)

Public announcement: 15 April 2014

Expected publication of the detailed public statement: By 23 April 2014

Expected dispatch of the letter of offer: On or around 4 June 2014

Commencement of tendering period: On or around 11 June 2014

Expiry of tendering period: On or around 24 June 2014

Settlement of consideration for accepting USL shareholders: On or around 8 July 2014

Note: The times and dates set out in the indicative abridged timetable above and mentioned throughout this announcement may be subject to adjustment, being dependent on the timing of the completion of the review process of the draft letter of offer by SEBI, regulatory approvals in India if required, and other permitted conditions to the Tender Offer. Details of any such adjustment and the new times and dates will be notified to USL shareholders by publication in relevant newspapers and will be announced on relevant stock exchanges. The times and dates are subject to the satisfaction or waiver of all applicable conditions to the Tender Offer and completion of the SEBI review process.

Shareholders’ Agreement

The shareholders’ agreement entered into on 9 November 2012 between Diageo, Relay, United Breweries (Holdings) Limited (“UBHL”) (holder of 5.93% of USL’s issued share capital as of 31 March 2014) and Kingfisher Finvest India Limited (a subsidiary of UBHL – “KFIL”)) (holder of 3.58% of USL’s issued share capital as of 4 April 2014 per a filing made by KFIL) and which took effect on 4 July 2013 as part of Diageo’s original investment in USL (the “Shareholders’ Agreement”) will remain in force following, and (other than as described below) will be unaffected by, completion of the Tender Offer.

Pursuant to the terms of the Shareholders’ Agreement, members of the UBHL group which hold USL shares are currently obliged to vote their shares at Relay’s direction. In the event that the Tender Offer is fully subscribed such that Diageo holds, indirectly, a majority of the shares in USL, this obligation will cease. In the event Diageo does not secure a majority of the shares in USL by virtue of the Tender Offer, the obligation on members of the UBHL group to vote their USL shares at Relay’s direction will remain in force until the earlier of the Diageo group reaching a majority position in USL and the end of the fourth full financial year of Diageo after 1 July 2014.


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