Diageo and Heineken strike Indian deal

Diageo has sold its remaining stake in United Breweries to Heineken for £89 million, in a move that could threaten controversial chairman Vijay Mallya.

The latest acquisition threatens to distance Vijay Mallya from control of United Breweries

Diageo-owned United Spirits (USL) said it was stepping back from non-core assets, selling its 3.2% stake, totalling 8.5m shares, to Heineken at 1,030 Rupees (£10.51) per share.

The Dutch brewer, which already commanded a 39% share of India’s largest beer producer before the deal, now has a 42% stake in the company.

The deal threatens to leave controversial alcohol magnate Vijay Mallya out in the cold as Heineken now commands a more sizeable majority shareholding over his 37.5% stake.

Heineken’s share acquisition could also free it from an earlier pact with Mallya based on equal shareholding and joint management, a United Breweries source told the Times of India. 

This deal, made in 2009, saw Mallya and Heineken each agree to own a 37.5% shareholding and have equal footing in managing the company.

However, Heineken is publicly denying that it is working to oust Mallya from the leadership of UB. “Heineken’s purchase doesn’t materially change the ownership structure or our successful collaboration,” it told the newspaper.

Diageo’s decision to sell its crucial stake in the brewing company is being seen as an indication that the British spirits giant is further conspiring to distance Mallya from the businesses he formerly owned.

In April, the USL board, which is controlled by Diageo following its £1.8 billion takeover last year, unsuccessfully tried to force Mallya to resign as chairman after allegations of financial mismanagement came to light.

Mallya’s accusers say that he diverted funds from USL to his failing Kingfisher Airlines business when he led the company, and that he threatens Diageo’s investment in USL through his on-going legal battles with companies related to Kingfisher’s collapse.