United Spirits fell 1.37% to Rs 2,739.20 at 11:12 IST on BSE after the company agreed to sell its Whyte & Mackay scotch whisky unit to Emperador Inc in a 430 million pound deal.
The company made the announcement after market hours on Friday, 9 May 2014.
Meanwhile, the BSE Sensex was up 379.51 points, or 1.65%, to 23,373.74.
On BSE, so far 33,000 shares were traded in the counter, compared with an average volume of 80,174 shares in the past one quarter.
Trading was volatile on the counter. The stock rose 0.82% at the day's high of Rs 2,800 in early trade. The stock fell 1.37% at the day's low of Rs 2,739.20 so far during the day.
The stock hit a record high of Rs 2,940.55 on 15 April 2014. The stock hit a 52-week low of Rs 1,993.30 on 28 August 2013.
The stock had outperformed the market over the past one month till 9 May 2014, rising 7.01% compared with 1.29% rise in the Sensex. The scrip had, however, underperformed the market in past one quarter, rising 12.35% as against Sensex's 12.85% rise.
The large-cap company has an equity capital of Rs 145.33 crore. Face value per share is Rs 10.
Emperador Inc is a leading Philippines-based integrated manufacturer of alcoholic beverages. Under the terms of the deal, Emperador has agreed to supply scotch whisky to United Spirits (USL) for a period of 3 years. Sale is subject lo USL shareholder approval as well as Indian and UK regulatory requirements and is pursuant to a commitment given to the UK Competition and Markets Authority.
USL said the sale will result in a significant write off of loan amounts recoverable by the company from its overseas subsidiary. The company shall issue a postal ballot notice and explanation statement to the shareholders of the company to seek their approval in due course as required.
Dr Vijay Mallya, Chairman of USL said, "I am very proud of what Whyte and Mackay (W&M) had achieved under USI ownership. Moreover, I am delighted to be able lo pass on W&M into the hands of a new owner who is committed to realising the full potential of the business and whose vision for W&M is aligned with that of USL.
Andrew Tan, Chairman of Emperador said, "Whisky is the second fastest growing spirits segment in the World next to Brandy. With this acquisition Emperador will be exposed to two of the fastest growing spirits segments in the World. The global demand for Scotch Whisky has shown strong growth over recent years and is expected to continue this momentum going forward. We are continuously looking to enhance shareholder value through earnings accretive investments. We believe that W&M is a prized asset with excellent growth opportunity and its acquisition is in line with our plans to enhance our product portfolio. W&M has a global distribution network in over fifty countries that Emperador Brandy will have access to."
The United Breweries (UB) group acquired W&M for 595 million pound sterling in 2007.
Last year, Diageo had announced that it would pick up 53.4% stake in USL in a multi-structured deal.
The idea to sell W&M came into play last year after the Office of Fair Trading (OFT) in Britain raised concerns about a possible combination of Diageo, the world's largest distiller, and USL.
OFT said the merger between Diageo and USL may lead to whisky price increases in the UK because Diageo, the world's biggest distiller, and W&M controlled a significant part of the UK market.
In November 2013, the companies offered to sell W&M to allay those regulatory concerns.
Diageo, through a subsidiary, is the largest shareholder of USL, with a 28.78% stake (as on 31 March 2014). It was unsuccessful in its efforts to take a majority stake in the company last year.
In April 2014, Diageo launched a second round of open offer to the shareholders of USL. The offer is for acquiring up to 3.77 crore fully paid up equity shares of face value of Rs 10 each, constituting 26% of the total fully diluted voting equity share capital of USL. The tender offer will be at a price of Rs 3,030 per share and the total consideration for the increased stake (assuming take-up in full at the announced price) will be Rs 11448.92 crore. Diageo has launched the tender offer through Relay BV (Relay), a wholly-owned indirect subsidiary of Diageo. If the offer is successful, Diageo would have a 54.78% stake in the company.
United Spirits shareholders have until 24 June 2014 to accept the Diageo offer.
USL will declare Q4 results on Friday, 16 May 2014. USL's net profit declined 19.4% to Rs 64.92 crore on 5.22% growth in total income to Rs 2351.49 crore in Q3 December 2013 over Q3 December 2012.
United Spirits is the largest alcohol beverage company in India, having sold 123.70 million cases in the year ended 31 March 2013.
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