FDBusiness.com

Following the acquisition of a further 14.98% stake in United Spirits Ltd (USL) for £344.2 million from United Breweries (Holdings) Ltd (UBHL), Diageo is now the major shareholder in the leading spirits company in India with a total shareholding of 25%.

Daigeo purchased an initial 10% stake for £249.3 million in May 2013. Diageo has  invested a total of £594.4 million in acquiring 25.02% of USL. This represents a 18x multiple of USL’s EBITDA for the year ended 31 March 2013 and the transaction is expected to be eps accretive in year 2 and economic profit positive in year 5 assuming a 12% WACC. Diageo has funded the acquisition through existing cash resources and debt.

Ivan Menezes (pictured), chief executive of Diageo, comments: “USL’s strong market-leading position combined with Diageo’s strength and capabilities opens an exciting and important new chapter for Diageo in the attractive Indian spirits market. Since we received approval for this transaction we have been getting ready for closing and integration. Having completed the share purchase, we will now begin the work to identify and capture the significant growth opportunities within this attractive market.”

He continues: “Through this acquisition we have transformed Diageo’s position in India, a market which is one of the biggest growth opportunities in our industry. India will become one of Diageo’s largest markets and with its increasing number of middle class consumers looking for premium and prestige local spirits brands as income levels rise it will also become a major contributor to our growth ambitions.”