Diageo Plc on Tuesday launched a tender offer to the public shareholders of United Spirits Ltd to acquire up to 37,785,214 shares in USL, which represents 26% of USL’s fully diluted issued share capital as on April 15. 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 11,448 crore (approximately £1,132,458,720).
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Diageo has launched the tender offer through Relay B.V. a wholly-owned indirect subsidiary of Diageo. Relay currently holds 28.78% of the issued share capital of USL, acquired for a total investment of Rs 6,574 crore (£726,550,972). On completion of the tender offer, if all shares are purchased, Relay will hold 54.78% of USL’s issued share capital and will have paid approximately Rs 18,023 crore (£1,859,009,692) for its total shareholding in USL.
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If the offer is subscribed in full, the total consideration payable, at the announced price for Diageo’s increased stake will represent a 38x multiple of USL’s EBITDA on a consolidated basis for the year ended March 2013. Diageo’s total investment of Rs 180,23 crore (£1,859,009,692) in USL is expected to be EP positive in FY2022, the 7th full financial year after completion (assuming a 12 % WACC) and EPS accretive in the year ended 30 June 2016.
USL is the leading spirits producer in India. On a consolidated basis, in the financial year ended 31 March 2013, USL earned net revenue of Rs 10,598 crore (£1,048.3 million) from operations, EBITDA of Rs 1,354 crore (£134.0 million) and losses after tax of Rs 105 crore (£10.4 million). USL had INR 16,384 crore (£1,621 million) of total assets on a consolidated basis as at 31 March 2013.
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