CCI objects to ‘ambiguities’ in Diageo-United Spirits deal
17 Jan 2013 6:27 AM IST
Fair trade regulator the Competition Commission of India (CCI) is believed to have expressed reservations over a proposed Rs 11,166 crore purchase of a majority stake in United Spirits Ltd (USL) —the country’s largest spirits company is part of Vijay Mallya-led UB Group — as it has found certain clauses of the deal to be based on probabilities and not definitive in nature.
CCI, whose approval is necessary for all major mergers and acquisitions involving Indian companies, is the second regulator after market watchdog Sebi to express its reservations over this deal.
CCI is not comfortable with the deal terms that provide for the existing promoters of United Spirits Ltd giving a preferential treatment to Diageo, if it fails to get the required number of shares from public shareholders through an open offer, sources close to the development said. The anti-trust regulator has asked the companies to rework the ambiguous parts and make the deal more definitive in nature, sources said, adding that CCI might even send back the application, if the companies fail to satisfy its concerns.
At the same time, Sebi (Securities and Exchange Board of India) has also expressed reservations about the preferential allotment of shares to acquirers if the open offer fails to elicit desired response from non-promoter shareholders.
Sources said Sebi is looking to ensure a fair play for minority shareholders vis-a-vis the benefits accorded to the acquirer entity. UK-based Diageo had announced a deal on 9 November, under which it agreed to acquire up to 53.4 per cent stake in USL for an aggregate amount of Rs 11,166.6 crore.
As part of the deal, Diageo would acquire 27.4 per cent stake for Rs 5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. It will also acquire further 26 per cent stake for Rs 5,441.07 crore through open offer. Any acquisition of 25 per cent or more stake in a listed company triggers a mandatory open offer for additional 26 per cent stake purchase from the public shareholders and the same needs to be cleared by the market regulator. The proposed open offer for an additional 26 per cent stake in USL entails purchase of about 3.8 crore shares at a price of Rs 1,440 per share, totalling to Rs 5,441 crore, by Relay BV, a wholly-owned subsidiary of Diageo.
KINGFISHER CEO MEETS DGCA... WITHOUT DETAILS OF REVIVAL PLAN FUNDING
Grounded Kingfisher Airlines on Wednesday made another attempt to convince Director General of Civil Aviation (DGCA) on its revival plans, but failed to provide any details on its funding which the aviation regulator wanted.
Kingfisher CEO Sanjay Agarwal met DGCA’s Arun Mishra to apprise him of the prevailing scenario facing the airline, but sources said he gave no information about any commitment by the airline's parent company, UB Group, on financing the revival plan. The sources said Agarwal told the regulator that the airline would be ready to resume operations from the Summer Schedule, that begins in April.
CCI, whose approval is necessary for all major mergers and acquisitions involving Indian companies, is the second regulator after market watchdog Sebi to express its reservations over this deal.
CCI is not comfortable with the deal terms that provide for the existing promoters of United Spirits Ltd giving a preferential treatment to Diageo, if it fails to get the required number of shares from public shareholders through an open offer, sources close to the development said. The anti-trust regulator has asked the companies to rework the ambiguous parts and make the deal more definitive in nature, sources said, adding that CCI might even send back the application, if the companies fail to satisfy its concerns.
At the same time, Sebi (Securities and Exchange Board of India) has also expressed reservations about the preferential allotment of shares to acquirers if the open offer fails to elicit desired response from non-promoter shareholders.
Sources said Sebi is looking to ensure a fair play for minority shareholders vis-a-vis the benefits accorded to the acquirer entity. UK-based Diageo had announced a deal on 9 November, under which it agreed to acquire up to 53.4 per cent stake in USL for an aggregate amount of Rs 11,166.6 crore.
As part of the deal, Diageo would acquire 27.4 per cent stake for Rs 5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. It will also acquire further 26 per cent stake for Rs 5,441.07 crore through open offer. Any acquisition of 25 per cent or more stake in a listed company triggers a mandatory open offer for additional 26 per cent stake purchase from the public shareholders and the same needs to be cleared by the market regulator. The proposed open offer for an additional 26 per cent stake in USL entails purchase of about 3.8 crore shares at a price of Rs 1,440 per share, totalling to Rs 5,441 crore, by Relay BV, a wholly-owned subsidiary of Diageo.
KINGFISHER CEO MEETS DGCA... WITHOUT DETAILS OF REVIVAL PLAN FUNDING
Grounded Kingfisher Airlines on Wednesday made another attempt to convince Director General of Civil Aviation (DGCA) on its revival plans, but failed to provide any details on its funding which the aviation regulator wanted.
Kingfisher CEO Sanjay Agarwal met DGCA’s Arun Mishra to apprise him of the prevailing scenario facing the airline, but sources said he gave no information about any commitment by the airline's parent company, UB Group, on financing the revival plan. The sources said Agarwal told the regulator that the airline would be ready to resume operations from the Summer Schedule, that begins in April.
Next Story
