The deal was stuck since last November following objections raised by the stock market regulator over the "put" option in purchase agreement and the offer price quoted by Diageo.
"Sebi on January 31 issued final observations in the matter. We believe that Sebi may have asked the companies to make certain changes in the purchase agreement. However, complete details are not known yet," a stock market expert said.
The deal was facing hurdles on account of the put options in the share purchase agreement, which give the United Breweries Group the right to sell its remaining stake in USL within seven years. As this is a forward contract, it violates takeover laws.
In the past, too, Sebi has taken a tough stance against such agreements, including the deal between Vedanta Resources and Cairn Energy.
Though Diageo and USL can appeal against Sebi’s stand, given the precedence in the case of such clauses, it is unlikely to do so. A senior group official said it intended to find solutions to “all aspects raised by regulators”.
On November 9, Diageo agreed to acquire 27.4% stake in USL by purchasing shares from existing promoters and preferential allotment of shares. On the same day, it had also announced a mandatory open offer to buy additional 26% stake at Rs 1,440 a share.
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Diageo had considered November 9, the day of share purchase agreement, as the public announcement date. However, according to Sebi regulations, the date of shareholder approval (December 14) should be considered the date of public announcement. If December 14 is considered the reference date, the open offer price would be higher, as the USL stock had risen after November 9.
At a board meeting on January 18, Sebi had said the date of board resolution authorising a preferential allotment, not the date of special resolution, should be the relevant date for triggering open offer obligations and determining the offer price. However, experts said this would be effected prospectively, adding it wouldn’t be applicable to the Diageo-USL deal.
The United Spirits stock was trading flat at Rs 1,854 at Bombay Stock Exchange on Tuesday afternoon.