Vijay Mallya’s move to sell up to 13 per cent stake in United Breweries Ltd to joint venture partner Heineken NV is understood to have hit a hurdle over the pricing issue.
Talks between the two have seen several ups and downs, but only recently have they entered into a critical phase, sources in the company told Business Line .
The Dutch brewer wants to buy the stake from Mallya based on the prevailing market price, which has been hovering between Rs 755 and Rs 800 over the past six months. But with United Breweries holding over 50 per cent market share in the domestic market, negotiators acting on behalf of Mallya insist they deserve a good premium.
A UB Group spokesperson, however, denied any such plan to offload the stake, but sources said the negotiations have been going on between the two for over a year now.
If the deal goes through, Heineken will end up with slightly over 50 per cent stake in United Breweries, the makers of popular Kingfisher and Kalyani Black Label beers. It will also mean that about 80 per cent of the total market will be controlled by Heineken and SAB Miller, both foreign multinationals, thus ending the dominance of Indian business houses in the segment.
The stake sale will allow Mallya and his companies to mop up between Rs 2,000 crore and Rs 2,250 crore, depending on the premium he is able to get over the existing share price. One of the reasons for Mallya to divest part of his stake in United Breweries could be to reduce his debt. But he could also be looking at getting better valuations from international liquor companies, which see a huge potential in the Indian market.
The Indian beer market is expected to grow to $9 billion (around Rs 55,760 crore today) in 2016, according to Euromonitor. Sources said that with Mallya selling his stake in United Spirits Ltd to UK-based Diageo Plc, it was just a matter of time before he decided to reduce his holding in United Breweries as well. Heineken is already the largest shareholder in United Breweries having gone past Mallya’s 37.4 per cent to 38.7 per cent earlier this month. It bought 1.3 per cent, or 3.5 million shares, from Citicorp Finance India at Rs 772.9 per share for a total consideration of Rs 280 crore.
The promoters totally hold 74.8 per cent with outstanding shares of 264.4 million. The total debt is at about Rs 950 crore. United Breweries’ stock closed at Rs 755.35 on BSE on Friday, up 2.24 per cent from the previous close.