Management control, competition norms hit USL-Diageo deal
Posted on: 09:20 PM IST Oct 23, 2012
New Delhi: Vijay Mallya's quest to raise funds seems to have hit a speed breaker. Sources say that the United Spirits Limited-global spirits company Diageo deal has hit a roadblock over issues related to management control.
According to sources there are two important issues that have to be clarified. First, about the management control and second, about the no extension given to United Spirits to bring down stake in Whyte & Mackay by the UK regulatory authorities.
Earlier, Vijay Mallya had agreed to give up majority control in terms of shareholding. However, it was discussed that Mallya will continue to remain the chairman of the joint entity.
Right now, USL is asking for clarity on the number of seats they will hold on the board and they also want two-three USL senior representatives and UB Group representatives to continue on the management of the company.
They are looking for a joint management structure, which Diageo is not comfortable with, considering the fact that Diageo will be acquiring majority stake.
According to their view Vijay Mallya can remain the chairman they would prefer if they takeover the management, so that is an important issue and that will define the future of the joint entity.
Aside from Whyte & Mackay deal which looks to be stuck. It is understood that the PE players are concerned about the valuation.
Until that goes through UK regulatories will not allow Diageo to acquire the company considering the fact that Diageo will have a monopoly. A deal is likely to be struck between 16-19 November. However there is no official comment from either of the player.
With Additional Inputs From Moneycontrol