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The Karnataka High Court today finally cleared the way for Vijay Mallya to go ahead with the Rs 11,160-crore deal with global spirits major Diageo.
In November 2012, Mallya and Diageo had signed a multi-stage deal, in which Diageo was supposed to get up to 53.4 per cent stake in India’s leading spirits company, United Spirits Limited (USL). As part of this agreement, United Breweries Holdings Limited (UBHL) was supposed to sell a part of its holdings in USL to Diageo. This move was contested by a group of unsecured creditors to Mallya’s Kingfisher Airlines, who said that UBHL should be wound up, as the holding company was unable to pay its debts.
The group of unsecured creditors, including BNP Paribas and Rolls-Royce among others, had said Kingfisher Airlines and UBHL should pay back close to Rs 500 crore of dues, without which UBHL cannot proceed with any other transaction. The Karnataka High Court, which has been hearing the case for nearly six months, today said UBHL can proceed with the share sale but has to furnish a security deposit of Rs 250 crore to the court.
Post the share sale to Diageo, the proceeds should also not be used for any business needs until the creditors’ issues are settled. The next hearing of the winding-up petition on UBHL will be heard on July 22.
While the court’s judgement today is indeed a big relief for Mallya on the transaction with Diageo, he still has to face numerous other legal challenges. United Bank of India has also filed a winding-up petition in the high court for loans worth around Rs 400 crore to Kingfisher. Mallya was supposed to transfer 27.4 per cent stake from his holdings in USL through UBHL, by selling treasury shares and by making a 10 per cent preferential allotment to Diageo. While the preferential issue of 10 per cent is expected to be wrapped up by the end of May, the share purchase agreement through which Diageo will get 17.4 per cent can be completed in June, post today’s order.
Diageo was also aiming to get an additional 26 per cent through an open offer, but could garner around 0.44 per cent during the issue which closed by the end of April 2013.
