Diageo eyes pledged shares of United Spirits

Vijay Mallya along with promoter companies hold 9.83% of which 9.37% is pledged

Diageo, the global spirits major, which is attempting to gain absolute 54.78 per cent stake in the publicly held United Spirits through a open offer, has said that entities holding pledged shares of United Spirits can tender in as well, provided there is no litigations pending. Diageo currently holds 28.78 per cent stake in United Spirits and is looking to acquire an additional 26 per cent through a open offer which is expected to open during mid-June 2014 at an estimated Rs 11,500 crore.

This clear indication from Diageo is expected to make it much more tough for Vijay Mallya to hold on to his dwindling stake in United Spirits. Mallya, along with a clutch of his companies holds 9.83 per cent in United Spirits of which as much as 9.37 per cent is pledged. According to information available, the majority of the pledges has been done through UB Holdings and Kingfisher Finvest for funding the now-grounded UB Group airline - Kingfisher Airlines.

A consortium of lenders led by State Bank of India have been engaged in a prolonged legal battle against Vijay Mallya to get back as much as possible of the Rs 6,000 crore outstanding which was lent for Kingfisher Airlines, based on pledges and corporate guarantees provided by Mallya and UB Holdings.

The lenders too have been over the past few months, offloading shares in the market to an extent and may look to encash on the open offer from Diageo. However, Diageo has made it clear that the titles should be clear for them to accept the same. "We would be willing to acquire any shares in USL that are being sold provided that any such shares are sold to us with the customary guarantees regarding unencumbered title and with any seller having obtained any necessary consents for it to sell their shares on the foregoing basis," Diageo said in a statement.

Even as the lenders are trying their very best to claw back the outstandings, Mallya too has been aggressive in stopping them from encashing to a major extent. There are a slew cases which UBHL has filed against the lenders to stem them from offloading the pledged shares in the market based on various legalities. Mallya has even said that the corporate guarantees should be deemed void as the lenders have acted with prejudice.