Earlier this month, Diageo announced that it has secured the resignation of United Spirits chairman Vijay Mallya from his position at the Indian unit. Here, just-drinks takes a look at Diageo’s relationship with the Indian entrepreneur:
- In November 2012, Diageo agreed a deal to acquire a 53.4% controlling stake in United Spirits from Mallya’s UB Group for INR111.7bn (US$2.05bn at the time). On the same day, Mallya, who continued as chairman of United Spirits, was moved to defend the sale, insisting that he had not “sold the family silver”. Diageo’s then-COO, Ivan Menezes, noted that India had the potential to become the company’s largest market in the long term
- In January 2013, a bid by Diageo to run UB Group’s sorghum beer business in South Africa as part of a JV moved a step closer after an agreement was signed. The other half of the JV was to be held by a company affiliated to Mallya
- In April of the same year, Mallya was told he must provide a personal guarantee of INR5bn (then US$91.9m) to obtain a four-week protection period against lenders hoping to sell a portion of pledged shares in United Spirits
- By July 2013, Diageo had completed another round of its United Spirits purchase, becoming the unit’s largest shareholder. Mallya was set to continue as chairman and non-executive director, and Diageo said that it would “explore the opportunity of extending the relationship (with Mallya) into other emerging markets in Africa and Asia … through a further joint venture relationship”
- In April 2014, Diageo announced it was forging ahead with its plans to take majority control of United Spirits, with the launch of a INR114.5bn (US$1.9bn) tender offer for a further 26% stake in the Indian company
- In September, after a near four-month delay, United Spirits reported its full-year results. The firm blamed problems with debtors and outstanding loans for the hold-up
- At the time, just-drinks reported that United Spirits was also embroiled in the tribulations surrounding Mallya. The company’s board launched an inquiry into loans allegedly given to other divisions within Mallya’s UB Group. Meanwhile, Mallya reportedly rejected allegations by the United Bank of India that he was a “wilful defaulter” in relation to his debt-laden Kingfisher Airlines
- In October, Vijay Mallya was re-elected as chairman of United Spirits at the AGM of the Diageo-controlled firm. In a statement, Diageo confirmed that Mallya would remain in the role. Under the original agreement with UB Group, the drinks giant was contractually obliged to vote in favour of keeping him on as chairman
- In April 2015, Diageo agreed a deal to take full control of UB Group’s United National Breweries. Diageo reached an agreement to buy the remaining 50% of the brewer from Pestello Investments, another company affiliated to Mallya
- Later in the month, Diageo said it was reviewing its United Spirits relationship with both UB and Mallya, after the division’s board called on the entrepreneur to stand down. The news came after an internal review claimed to have found a diversion of funds from the company to “certain UB Group companies, including in particular, Kingfisher Airlines”
- At the end of May, Diageo declined to comment on the Indian Government’s investigation into United Spirits’ books, as fresh reports emerged linking Mallya to alleged loans made from the unit
- In July, Menezes, by now Diageo’s CEO, admitted that his company’s purchase of majority control of United Spirits had given the firm its fair share of headaches
- Finally this month, Diageo secured Mallya’s resignation. As part of the agreement, he will qualify for a US$75m pay-off over the next five years
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