British spirits giant Diageo Plc – makers of Johnnie Walker whiskey, Guinness beer and Smirnoff vodka, among others – on Tuesday re-launched a bid to increase its stake in India’s United Spirits Ltd, making a $1.9 billion (1.1 billion pounds) bet on rising incomes in a country where consumption of alcohol remains relatively low.
Diageo, which already holds a 28.8 percent stake in United Spirits and has management control, offered shareholders of the Indian company an 18.5% premium on the current stock price.
If successful, Diageo would end up with 54.8 percent of India’s largest spirits maker, which was previously controlled by tycoon Vijay Mallya, who was forced to sell of much of his holdings following the collapse of his Kingfisher Airlines.
Mallya however, remains chairman of United Spirits.
Last year, Diageo completed the purchase of its existing stake in United Spirits, settling with considerably less than it had sought after a 2012 tender offer failed when it opted not to lift its offer price despite a surge in United Sprits shares.
“We do think that it will be a successful transaction,” Deirdre Mahlan, chief financial officer of Diageo, told Reuters on Tuesday.
“This price is also at an attractive premium to the market price and we believe that it creates a unique opportunity for investors to be able to monetise their investments.”
Two-thirds of Indians do not drink alcohol at all, often for religious or cultural reasons, but rapid urbanisation, a young population and a fast-growing middle class are changing consumption habits.
Alcoholic beverage sales in Asia’s third-largest economy are forecast by Euromonitor to rise up to 8 percent a year by volume through 2017.
Despite an Indian economy growing at its slowest in a decade, global companies have continued to invest in the long-term potential of consumer spending in the country.
Last week, UK telecoms giant Vodafone Group Plc bought the remaining 11 percent in its Indian unit.
Diageo intends to keep United Spirits listed in India even if its offer is successful. The new offer will be launched in June, a company statement said.
Mallya’s UB Group owned 10.46 percent of United Spirits at the end of December.