The stock of United Spirits Ltd (USL) on Wednesday hit a high of Rs 2,195 — a level it has not seen since its debut on the bourses — as the open offer from Diageo Plc to the shareholders of USL is currently on.
The USL stock has surged 20.3 per cent since the UK-based Diageo Plc commenced its Rs 5,441-crore open offer to acquire an additional 26 per cent in the company at an offer price of Rs 1,440 a share. The open offer, which commenced on April 10, will close on April 26.
According to analysts, the open offer from Diageo is unlikely to succeed as it has not raised the offer price, which is substantially lower than the market price. However, Diageo may be satisfied with the 27.4 per cent stake it gets directly from USL as it would still have management control. The company may not be in favour of putting more money on the table to buy another 26 per cent stake.
The open offer is part of the deal announced in November last when Diageo Plc agreed to buy 53.4 per cent stake in United Spirits. This comprise 27.4 per cent stake (19.3 per cent from Vijay Mallya plus fresh equity from USL) — and the remaining 26 per cent stake from the public shareholders.
According to market sources, one of the big domestic high net worth individuals is accumulating the stock while dumping his holding in a pharma major.
BNP Paribas analysts Alok Dalal and Vijay Chugh, in their March 6 research report, said: “Diageo will likely attempt to transform USL through the premiumisation of its products, induce best practises to improve operational efficiencies, repair the balance sheet and return the company to generating free cash flows.”
BNP initiated its coverage on United Spirits with a ‘buy’ recommendation and a price target of Rs 2,173.
Meanwhile, the company on Wednesday disclosed the March quarter shareholding pattern. According to this, promoters’ holding declined to 25.48 per cent from 27.51 per cent. Domestic institutions also reduced their exposure to 5.96 per cent (6.21 per cent), even as FIIs increased their holding to 46.69 per cent (45.81 per cent). Over 10,000 small retail investors have also quit United Spirits in January-March quarter.
Despite minor swings, the Diageo Plc is hovering around £1,980, since the open offer began.