Diageo Bids to Increase Stake in United Spirits
Diageo is seeking to increase its stake in United Spirits Ltd, the leading spirits producer in India, from 28.8% to 54.8%. Diageo has launched a tender offer of £1.13 billion to acquire a further 26% of USL.
On a consolidated basis, in the financial year ended 31 March 2013, USL earned net revenue of INR105,980 million (£1.05 billion) and EBITDA of INR13,548 million (£134.0 million) and losses after tax of INR1,050 million (£10.4 million). USL had INR 163,849 million (£1.62 billion) of total assets on a consolidated basis as at 31 March 2013.
Diageo has launched the Tender Offer through 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 £726.6 million). On completion of the Tender Offer (assuming full take-up), Relay will hold 54.78% of USL, and will have paid approximately £1.86 bullion in total.
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.
Diageo’s total investment of £1.86 billion 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.
