The fate of the Rs 11,000-crore United Spirits-Diageo deal continues to remain uncertain, as the Securities and Exchange Board of India (Sebi) is yet to give its nod to the open offer. Sebi wants Diageo to raise the open offer price and drop the ‘put options’ in the share purchase agreement with the United Breweries Group, sources said.
The Rs 5,440 crore-open offer to be made by the British liquor company to United Spirits Limited (USL) minority shareholders was “under process” at the regulator’s end, according to the processing status on Sebi’s website earlier this week.
The deal also faces a hurdle 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 had taken tough stances 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.
It is likely the United Breweries Group would agree on dropping the clause. A senior group official said it intended to find solutions to “all aspects raised by regulators”.
United Breweries Holdings and USL didn’t respond to queries. Separate emails sent to Sebi and Diageo remained unanswered.
Sources said according to Sebi’s calculations, the open offer price would be higher that that stated by Diageo. Though Diageo’s open offer price was also computed using the Sebi formula, there is a difference in the interpretation of the date of public announcement, the most important reference point for arriving at the price.
On November 9, Diageo had agreed to acquire 27.4 per cent 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 per cent stake at Rs 1,440 a share.
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.
