By Sumeet Chatterjee
April 5 (Reuters) - UK drinks group Diageo Plc's bid
to raise its stake in India's United Spirits through
a mandatory public open offer is unlikely to succeed after it
opted not to lift its offer price, although it remains on track
to take management control of the country's biggest liquor
Diageo is sticking with its tender offer price of 1,440
rupees a share for up to 26 percent of the Indian company, its
adviser JM Financial said in a notice to the Bombay Stock
Exchange on Friday, despite a sharp surge in the United Spirits
share value since the deal announcement in November.
Shares in United Spirits, controlled by embattled Indian
tycoon Vijay Mallya, were trading down 4 percent at 1,752 rupees
at 0655 GMT on Friday. The open offer will be launched on April
10 and close on April 26.
"If the open offer is not successful, and it's unlikely to
be, I think Diageo will be very happy to stay with about 30
percent stake and a control over the board and the management,"
said a source directly involved with the acquisition deal.
Under deal terms announced in November, Diageo is buying
27.4 percent of United Spirits directly from Mallya's group. If
Diageo fails to buy outright control through the open offer,
Mallya's United Breweries Holdings Ltd, which owns a
United Spirits stake, would vote with Diageo on decisions for
Diageo's tender offer, which had earlier been due to close
by the end of March, was delayed as the companies awaited Indian
A spokesman for Mallya's UB Group declined to comment on
Friday. Diageo, the maker of Johnnie Walker whisky and Guinness
beer, also declined to comment.
The deal had been seen as boosting Mallya's efforts to
revive his Kingfisher Airlines, which has been
grounded as it was unable to pay staff and others.
Although Mallya has repeatedly played down any link between
the United Spirits sale and problems at his airline, lenders to
the grounded carrier have been hoping that he would use a part
of the proceeds to pay them back.
In another development that could complicate Diageo's plan
to raise its stake in the Indian company, Kingfisher creditors
this month sold some of the United Spirits shares that had been
pledged with them, according to dealers and an executive with
its lead lender, State Bank of India (SBI).
SBI Cap Trustee, a unit of SBI, sold shares of Mallya's
Mangalore Chemicals and Fertilizers Ltd that had been
pledged with it on Tuesday, adding further pressure on the
businessman who styles himself the "King of the Good Times".
Diageo in November agreed to buy a controlling 53.4 percent
of United Spirits for $2.1 billion under a two-stage process
including the public offer, in a push by the world's biggest
spirits group to expand in fast-growing markets.