Diageo PLC DGE Diageo will take a shareholding in USL
Diageo PLC (DGE) - Diageo will take a shareholding in USL
RNS Number : 7571Q
Diageo PLC
09 November 2012
Thursday 9 November 2012
Diageo, UBHL and USL today announce that Diageo will take a shareholding in
USL, the leading Indian spirits company
Diageo will now launch a Mandatory Tender Offer to the public shareholders of
USL
Diageo plc, United Breweries (Holdings) Limited and United Spirits Limited
have today announced agreements under which Diageo would acquire a 27.4% stake
in USL, the leading spirits company in India. The consideration will be INR
1440 per share and the total consideration would be INR 57,254 million
(approximately £660 million). Following completion of these agreements, Dr
Vijay Mallya will continue in his current role as Chairman of USL, and UBHL
and Dr Mallya will work with Diageo to build the USL business as the current
consumer trends for premiumisation accelerate in India. The agreements are in
two parts:
· An agreement to acquire a 19.3% interest in the current share capital of
USL at a price of INR 1440 per share from the UBHL group, the USL Benefit
Trust, Palmer Investment Group Limited and UB Sports Management (two
subsidiaries of USL) and SWEW Benefit Company (a company established for the
benefit of certain USL employees). Following this disposal, the UBHL group
would continue to have a shareholding in USL amounting to 14.9% of current
share capital.
· The shareholders of USL will be asked to approve the preferential
allotment to Diageo at a price of INR 1440 per share of new shares amounting
to 10% of the post-issue enlarged share capital of USL.
These agreements trigger an obligation on Diageo to launch a Mandatory Tender
Offer to the public shareholders of USL. Diageo has therefore also announced
that it will launch a tender offer to acquire, at a price of INR 1440 per
share, a maximum of 37,785,214 shares, which equates to 26% of the enlarged
share capital of USL.
On completion of the share purchases as described above and in the event that
the tender offer were fully subscribed, Diageo will hold 53.4% of the enlarged
USL share capital at an aggregate cost of INR 111,665 million (approximately
£1,285 million). This represents a 20x multiple of USL's EBITDA for the year
ended 31 March 2012 and the transaction would be eps accretive in year 2 and
economic profit positive in year 6 assuming a 12 % WACC.
Diageo and Dr Mallya have entered into a memorandum of understanding under
which they will form a 50:50 joint venture which will own United National
Breweries' traditional sorghum beer business in South Africa. Diageo's
investment for its 50% interest in the joint venture is expected to be
approximately USD 36 million (approximately £25 million), subject to
adjustment. Diageo and Dr Mallya are also considering the possibility of
extending this joint venture in order to maximise opportunities which exist in
certain emerging markets in Africa and Asia (excluding India).
Paul S Walsh, Chief Executive of Diageo, said:
'I am delighted at the opportunity Diageo has to be part of India's large and
growing local spirits market. As a result of the agreements we are announcing
today we will be well positioned to take the growth opportunities presented by
a spirits market where growth is driven by the increasing number of middle
class consumers. USL's number 1 position in local spirits together with our
growing international spirits business of leading brands will enable us to
grow across the consumer space as India's increasing number of middle class
consumers look to enjoy premium and prestige local spirits brands as income
levels rise. The combination of USL's strong business with the capabilities
which Diageo brings as the world's leading premium drinks company will ensure
that USL continues to lead the industry in India.
Vijay Mallya's experience in building USL to the leadership position it has is
unique in our industry and in his position, as Chairman of USL, I look forward
to working with him to deliver value for the shareholders of both USL and
Diageo.
The acquisition of our shareholding in USL is fully aligned with our strategy
to build our presence in the world's faster growing markets and enhances our
position as the world's leading premium drinks company.'
Dr Vijay Mallya, Chairman of the UB Group, said;
'I am very proud of USL and what has been created over the last 30 years to
bring this company to its pre-eminent position in India. I have had a long
association with Diageo and therefore I am confident that this winning
partnership with Diageo provides USL with the best possible platform for
future growth. I am delighted to remain part of that journey as Chairman of
USL as we work together to build continued value for the shareholders of USL
and UBHL.'
The key points of the agreements between Diageo, UBHL and USL are:
· Completion of the acquisition of shares from the UBHL group, the USL
Benefit Trust, Palmer Investment Group Limited and UB Sports Management (two
subsidiaries of USL) and SWEW Benefit Company (a company established for the
benefit of certain USL employees) is subject to a number of conditions. These
conditions include the release of all security interests over the USL shares
to be acquired by Diageo. They also include the receipt of mandatory
regulatory approvals (including competition approvals) in India and elsewhere.
· Diageo has reached agreement with USL under which the shareholders of
USL will be asked to approve (by special resolution) the preferential
allotment of new shares to Diageo, at a price of INR 1440 per share. The price
is subject to applicable pricing rules under Indian regulations. These new
shares will amount to 10% of USL's post-allotment enlarged share capital. UBHL
will vote in favour of the resolution. The preferential allotment is subject
to certain conditions including USL shareholder approval and if successful,
combined with the above acquisition of shares, would result in Diageo owning
27.4% of the enlarged share capital of USL.
· The preferential allotment and the acquisition of shares from the USL
subsidiaries will enhance USL's financial strength, including a reduction in
USL's net debt.
· Total consideration for the aggregate shareholding, representing 27.4%
of the enlarged USL share capital, acquired through the arrangements for the
acquisition and the preferential allotment described above would therefore be
INR 57,254 million (approximately £660 million).
· The combination of the acquisition and the preferential allotment
trigger an obligation on Diageo to launch a mandatory tender offer for a
minimum of 26% of the issued share capital of USL. Diageo will launch a tender
offer to acquire a maximum additional interest in USL of no more than 26% of
the enlarged USL share capital. The tender offer will be at a price of INR
1440 per share, representing a premium of over 35% to the closing price of
USL's shares on 24 September 2012, the last business day before the
announcement that Diageo, UBHL and USL were in discussions regarding possible
transactions. At that price, the total consideration under the tender offer
(assuming full take-up) would be INR 54,411 million (approximately £625
million).
· Following the formal documentation review process of SEBI, the Indian
takeover regulator, Diageo will post the tender offer documentation to USL
shareholders. Completion of the acquisition and tender offer is expected to
occur in the first quarter of 2013.
· Diageo will fund the acquisition through existing cash resources and
debt. Diageo believes that its financial strength supports its current single
A credit rating and will hold discussions with the rating agencies as a
consequence of this announcement.
· In certain circumstances where the preferential allotment is not
successful (including where it is not approved by the shareholders of USL),
UBHL has agreed to sell additional shares in USL to Diageo at a price of INR
1440 per share to ensure that Diageo has a minimum shareholding of 25.1%.
· In addition, if the share purchase agreement, the preferential
allotment and the tender offer do not result in Diageo holding a majority
interest in USL, UBHL has agreed to vote its remaining shareholding in USL as
directed by Diageo for a four year period. UBHL will also vote its USL shares
to enable Diageo to ensure that its nominees are appointed to the USL board.
· In the event that Diageo does not acquire a majority interest it is
likely that a minimum shareholding of 25.1%, together with the voting
arrangements and other governance arrangements agreed with the UBHL group and
its relationship with Dr Mallya as Chairman of USL, would enable Diageo to
reflect the results of USL in its consolidated accounts.
· The tender offer will be governed by the applicable takeover
regulations of India and is subject to certain conditions.
JM Financial acted as lead transaction and financial adviser to Diageo on the
transaction; BofA Merrill Lynch acted as joint financial adviser; UBS also
provided financial advice to Diageo.
Slaughter and May and Platinum Partners acted as legal advisers to Diageo.
Deloitte LLP provided Financial and Tax due diligence services.
For UBHL & USL:
Citigroup Global Markets acted as lead financial adviser; Ambit Corporate
Finance advised UBHL on tax and structure-related issues.
Amarchand and Mangaldas & Suresh A. Shroff & Co. acted as lead legal adviser.
Legal adviser on matters of English Law - Herbert Smith Freehills LLP;
Legal adviser for legal due diligence process - Kanga & Co.
Important information
The important information set out below comprises information regarding:
· United Spirits Limited ("USL")
· The acquisition by Diageo, through its wholly-owned subsidiary Relay
B.V., of USL shares from United Breweries (Holdings) Ltd ("UBHL") and/or
members of its group, the USL Benefit Trust, Palmer Investment Group Limited
and UB Sports Management Overseas Limited (two subsidiaries of USL), and SWEW
Benefit Company (the "Acquisition")
· The proposed preferential allotment of new shares in USL to Relay B.V.
(the "Preferential Allotment")
· The mandatory tender offer to public shareholders of USL (the "Tender
Offer", and together with the Acquisition and the Preferential Allotment the
"USL Transaction")
· Joint venture arrangements
· Conditions of the USL Transaction
· Other important information and certain potential transaction risks
· Next steps
USL
USL is the leading spirits producer in India. In the financial year ended 31
March 2012, the company had net sales of INR 91,865 million (£1,057 million),
EBITDA of INR 13,092 million (£150.6 million) and profits after tax of INR
1,872 million (£21.5 million). As at 31 March 2012, USL had gross assets of
INR 158,565 million (£1,824.5 million).
Acquisition
Under a share purchase agreement (the "Share Purchase Agreement") executed
today, Diageo (through its wholly-owned subsidiary, Relay B.V. ("Diageo
Bidco")) has agreed, subject to the satisfaction (or, where applicable,
waiver) of certain conditions, to acquire, at a price of INR 1440 per share
(representing aggregate consideration of INR 36,327 million (£418.0 million)),
25.23 million shares in USL, representing 19.29% of the current issued share
capital of USL, from UBHL and/or members of its group, the USL Benefit Trust,
Palmer Investment Group Limited and UB Sports Management Overseas Limited (two
subsidiaries of USL), and SWEW Benefit Company (a company controlled by a
committee appointed by Dr Vijay Mallya and whose principal purpose is the
benefit of specified USL employees).
In addition, UBHL has agreed, again conditionally, to sell additional shares
to Diageo Bidco (the "Additional Shares Obligation") in certain circumstances
where the Preferential Allotment does not complete and Diageo Bidco holds less
than 25.1% of USL after taking account of USL shares acquired under the Tender
Offer, under the Share Purchase Agreement or in any other manner. Where the
Additional Shares Obligation applies, UBHL would sell to Diageo Bidco such
number of shares as would take Diageo Bidco to a holding of 25.1% in USL.
Following completion of the Share Purchase Agreement (and assuming completion
of the Preferential Allotment and, therefore, no application of the Additional
Shares Obligation), UBHL and members of its group would continue to hold 13.4%
of USL.
The Share Purchase Agreement contains certain warranty and indemnity
protection in favour of Diageo and Diageo Bidco in respect of the USL group
and on certain matters relating to the UBHL group. UBHL has also undertaken
to exercise its shareholder rights and otherwise use reasonable endeavours to
cause USL to carry on its business in the normal course (other than for
certain agreed exceptions) prior to completion of the Share Purchase
Agreement.
Diageo, Diageo Bidco, UBHL and Kingfisher Finvest India Limited (a subsidiary
of UBHL) have also entered into an agreement governing their relationship as
shareholders in USL (the "Shareholders' Agreement") which will come into
effect in the event of and upon completion of the Share Purchase Agreement.
The principal provisions of the Shareholders' Agreement are as follows:
· The parties will use their respective rights as shareholders such that:
(i) Diageo will be able to nominate, propose or recommend directors to
the USL board and appoint its nominees to the roles of CEO and CFO;
(ii) UBHL will be able to nominate one director (who would be Dr Vijay
Mallya) and recommend a second non-executive director who will, to the extent
feasible, be an independent director, to the USL board. The right to recommend
the second director falls away if the UBHL group no longer holds 5% or more of
USL's current share capital, and both appointment rights fall away if its
holding falls below 1% of USL's current share capital. These rights of UBHL
are also subject to Dr Mallya continuing to control UBHL, and in certain
circumstances where Dr Mallya ceases to control UBHL he would succeed to the
right to nominate himself as a director of USL subject to his holding at least
1% of USL's current share capital;
(iii) the balance of the USL board will comprise independent non-executive
directors in such number as is required by law. Indian law and regulation
requires, where the chairman is not independent (as will be the case in
relation to Dr Mallya), that at least half of the board should comprise
independent non-executive directors; and
(iv) certain veto and consultation arrangements agreed with UBHL and Dr
Mallya will apply as part of their continued involvement in USL.
· Diageo will support Dr Mallya continuing as non-executive director and
chairman of USL subject to the UBHL group or Dr Mallya continuing to hold at
least 1% of USL's current share capital and certain other conditions. In the
event that Dr Mallya ceases to be non-executive director and chairman by
reason of resignation or because the qualifying test is no longer met, he
would, subject to certain conditions, be appointed as chairman emeritus of
USL, a non-board role.
· In the event that, following the USL Transaction, Diageo Bidco does not
hold a majority of the ordinary shares in USL, members of the UBHL group which
hold USL shares will, subject to specific and limited agreed exceptions, vote
their shares at Diageo's direction. This voting obligation will terminate
upon the Diageo group reaching a majority position or otherwise at the end of
the fourth full financial year of Diageo after the date on which the Share
Purchase Agreement completes.
· UBHL has agreed that members of its group shall be subject to certain
restrictions regarding future acquisitions and disposals of shares in USL
(including the granting of security). The Shareholders' Agreement allows the
transfer of shares to a class of permitted transferees, and such transferees
will generally have the benefit of the Shareholders' Agreement and hold their
USL shares subject to it. In addition, if a member of the UBHL group proposes
to transfer any USL shares other than to a permitted transferee, it must first
offer them to Diageo Bidco at the price at which it proposes to sell the
shares. To the extent that Diageo Bidco does not take up its right to acquire
the shares at that offered price, the relevant member of the UBHL Group would
be free, subject to certain limitations, to sell its shares to a third party
at or above the offered price.
· Diageo Bidco has granted UBHL the right to put its remaining stake in
USL on Diageo Bidco at a price of INR 1440 per share (being the same price per
share as under the Share Purchase Agreement), except that Diageo Bidco will
not be required to acquire further USL shares under this put option to the
extent that such acquisition would trigger an obligation on Diageo Bidco to
make a further tender offer for shares in USL. UBHL's put right will
terminate on the seventh anniversary of the earlier of the Diageo group
achieving a 50.1% holding in USL and Diageo first consolidating a full
financial year's results for USL in its annual financial statements.
· In the event that Diageo proposes to make certain material disposals of
USL shares, it has agreed that UBHL shall, in certain circumstances, also have
the right to sell its shares as part of any such transaction.
· UBHL and its affiliates have agreed certain undertakings not to compete
with USL while the Shareholders' Agreement remains in force and for two years
following its termination.
Please refer to the "Conditions of the USL Transaction" section below for a
summary of some key conditions to which the Acquisition is subject and for
details of certain circumstances in which the Additional Shares Obligation
will not apply.
Preferential Allotment
Diageo and Diageo Bidco have entered into an agreement with USL (the
"Preferential Allotment Agreement") under which the shareholders of USL will
be asked to approve (by special resolution) the preferential allotment to
Diageo of 14.53 million new shares in USL at a price of INR 1440 per share.
This price is subject to change in accordance with applicable pricing rules
for preferential allotments under Indian law and regulation. These new shares
will amount to 10% of USL's enlarged share capital. UBHL has undertaken to
vote its USL shares in favour of the special resolution.
The Preferential Allotment Agreement contains certain warranty and indemnity
protection in favour of Diageo Bidco. USL has also undertaken to carry on its
business in the normal course until the later of completion of the
Preferential Allotment and completion of the Share Purchase Agreement (other
than for certain agreed exceptions).
The proceeds of the Preferential Allotment will be used for the purpose of
repaying existing USL group indebtedness and for use in the ordinary course of
business, including for the purpose of working capital or capital expenditure.
Please refer to the "Conditions of the USL Transaction" section below for a
summary of the conditions to which the Preferential Allotment is subject.
Tender Offer
Simultaneously with this release, Diageo (through its wholly-owned subsidiary,
Diageo Bidco) has announced its intention to launch a mandatory tender offer
to the public shareholders of USL to acquire up to an additional 28.89% of
USL's existing share capital. This represents 26.00% of USL's share capital
as it would be enlarged by the Preferential Allotment. The Tender Offer will
be governed by the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations 2011 (the "Regulations") and
applicable law. The applicable Indian takeover regulator is the Securities
and Exchange Board of India ("SEBI").
The Tender Offer will be made in accordance with the Regulations and on the
terms and conditions set out in the public announcement to be made today in
India and the detailed public statement and letter of offer that are to be
released by Diageo and Diageo Bidco in India.
The Tender Offer has been announced at the following price:
for each USL Share INR 1440 in cash
At that price, and assuming full take-up of the offer by USL shareholders, the
total aggregate consideration payable under the Tender Offer would be
approximately INR 54,411 million (£626.1 million). This values USL at
approximately INR 209,272 million (£2,407.9 million) on a post-Preferential
Allotment basis.
The offer price announced today represents a premium of over 35% to the price
of a USL share on 24 September 2012, the last business day prior to the
announcement that Diageo, UBHL and USL were in discussions regarding possible
transactions.
If the Tender Offer is over-subscribed, the accepting USL shareholders will be
scaled back and entitled to sell such number of shares calculated on a pro
rata basis to the shares tendered in the Tender Offer.
Indicative Abridged Tender Offer Timetable (see note)
Public announcement 9 November 2012
Expected publication of the detailed public By 20 November 2012
statement
Expected dispatch of the letter of offer On or around 31 December 2012
Commencement of tendering period On or around 7 January 2013
Expiry of tendering period On or around 18 January 2013
Settlement of consideration for accepting USL On or around 1 February 2013
shareholders
Note: The times and dates set out in the indicative abridged timetable above
and mentioned throughout this announcement may be subject to adjustment, being
dependent on the timing of the completion of the review process of the draft
letter of offer by SEBI, regulatory approval in India and elsewhere, and other
permitted conditions to the Tender Offer. Details of any such adjustment and
the new times and dates will be notified to USL shareholders by publication in
relevant newspapers and will be announced on relevant stock exchanges. The
times and dates are subject to the satisfaction or waiver of all applicable
conditions to the Tender Offer and completion of the SEBI review process.
Please refer to the "Conditions of the USL Transaction" section below for a
summary of the conditions to which the Tender Offer is subject.
Further important information relating to the Tender Offer, and certain
implications of the SEBI review process required to confirm the terms and
conditions (including price) of the Tender Offer, are set out in the "Other
Important Information and Certain Potential Transaction Risks" section below.
As required by the Regulations, Diageo (through its wholly-owned subsidiary,
Diageo Bidco) has also announced its intention, subject to successful
completion of the Tender Offer, to launch a mandatory tender offer to the
public shareholders of Pioneer Distilleries Limited ("Pioneer") (a subsidiary
of USL) to acquire up to 18.42% of Pioneer's outstanding share capital.
Pioneer shareholders would be entitled to receive INR 60 for each Pioneer
share. This values Pioneer at approximately INR 803 million (£9.2 million).
Further details will be announced following completion of the Tender Offer.
At that price, and assuming full take-up of the offer by Pioneer shareholders,
the maximum aggregate consideration payable would be approximately INR 148.0
million (£1.7 million). As the shares of Pioneer are infrequently traded on
the Indian stock exchanges, this price is based on an independent valuation
and not the market price. The market price of a Pioneer share on the last
business day prior to this announcement was INR 38.25.
Joint Venture Arrangements
Diageo and Dr Vijay Mallya have entered into a memorandum of understanding to
establish a joint venture to own United National Breweries' traditional
sorghum beer business in South Africa.
Under the memorandum of understanding, which is non-binding and subject to
definitive documentation:
· Diageo would acquire a 50% interest for an expected cash consideration
of approximately USD 36 million (£23 million), subject to adjustment. The
other 50% would be held by a company affiliated to Dr Mallya.
· Diageo and the Dr Mallya affiliated company would have equal
shareholder votes in the joint venture company and equal representation on its
board. Dr Mallya would be chairman of the joint venture company but would
have no casting vote.
Implementation of the South African joint venture would be conditional on
certain consents, including from the South African competition authority and
other relevant regulatory authorities.
Diageo and Dr Mallya are also considering the possibility of extending their
joint venture relationship by establishing a joint venture in respect of
certain emerging markets in Africa and Asia (excluding India) on terms and
with a scope as yet to be determined. It is not certain whether such a joint
venture will be established or, if so, on what basis. If this emerging
markets joint venture is established, it is expected that the South African
joint venture would be contributed to it.
Conditions of the USL Transaction
This section sets out the principal conditions to which the USL Transaction is
subject.
Acquisition
The acquisition under the Share Purchase Agreement is subject to satisfaction
(or, in certain cases, waiver) of a number of conditions, including: (i)
completion of the Tender Offer in accordance with its terms, (ii) the absence
of insolvency-related events and proceedings in respect of the USL group and
the sellers, (iii) consents or waivers from certain lenders to the USL group,
(iv) the release of any and all encumbrances over the business and assets of
the USL group relating to the indebtedness or liabilities of the UBHL group or
any persons connected with it, (v) no member of the USL group having
responsibility for debts or liabilities of the UBHL group or any persons
connected with it, (vi) the release of all security and encumbrances over the
USL shares that are being sold under the agreement, (vii) competition approval
or clearance in India and elsewhere, (viii) certain other regulatory and third
party consents, and (ix) there being no breach of certain key warranties and
there being no breach of other warranties that would give rise to a material
adverse effect.
The long-stop date for satisfaction (or, where applicable, waiver) of these
conditions is 9 November 2013, or such later date as may be agreed.
Preferential Allotment
The Preferential Allotment is conditional on the satisfaction (or, in certain
cases, waiver) of a number of conditions, including: (i) the approval by USL
shareholders of a special resolution, (ii) competition approval or clearance
in India and elsewhere, (iii) various regulatory and stock exchange approvals,
(iv) consents or waivers from various lenders to the USL group, (v) the
absence of certain insolvency events and proceedings in respect of the USL
group, and (vi) there being no breach of certain key warranties and there
being no breach of certain other warranties that would give rise to a material
adverse effect. In addition, the agreement is conditional upon (a) the per
share subscription price for the preferential allotment being not greater than
the price of INR 1440 announced today, (b) the Tender Offer price of INR 1440
price announced today not being subject to increase under applicable law and
regulations, and (c) certain of the conditions to the Share Purchase Agreement
being satisfied and the Share Purchase Agreement not being subject to any
restraining order or judgment or any legal or regulatory impediment.
In certain circumstances where the Preferential Allotment does not become
unconditional on account of non-satisfaction (and non-waiver) of those last
three conditions, or on account of certain other matters that are reasonably
within Diageo's control or for which it is responsible, the Additional Shares
Obligation described above will not apply under the Share Purchase Agreement.
The long-stop date for satisfaction (or, where applicable, waiver) of the
conditions under the Preferential Allotment Agreement is 9 November 2013 or
such later date as may be agreed or as may otherwise apply under the
Preferential Allotment Agreement.
Tender Offer
The Tender Offer is subject to a number of closing conditions, including (i)
the receipt of competition approvals in India and elsewhere, (ii) arrangements
for the release of security interests over the USL shares to be sold to Diageo
Bidco under the Share Purchase Agreement, (iii) the release of any and all
encumbrances over the business and assets of the USL group relating to the
indebtedness or liabilities of the UBHL group or any persons connected with
it, and (iv) no member of the USL group having responsibility for debts or
liabilities of the UBHL group or any persons connected with it.
The full conditions of the Tender Offer will be set out in the relevant formal
documentation for that offer.
Other Important Information and Certain Potential Transaction Risks
This section sets out some additional important information relating to the
Tender Offer and its process as well as certain potential risks relating to
the USL Transaction.
The Tender Offer will be made in compliance with the Regulations which came
into effect in October 2011. The Regulations substantially changed the
regulatory environment applicable to tender offers in India.
The terms, conditions, timetable and public documentation in relation to the
Tender Offer are subject to review and observations issued by SEBI. SEBI may
require changes to be made to the terms (including price), conditions,
timetable and public documentation in relation to the Tender Offer and Diageo
Bidco would be obliged to implement such changes (subject to a right of
appeal).
There is limited precedent as to how these rules might be interpreted and the
nature of the observations and directions that SEBI might issue pursuant to
the Regulations, both generally and specifically in relation to the terms of
the Tender Offer and the USL Transaction.
Having carefully considered the Regulations and their application to the USL
Transaction, the Tender Offer and the various other matters outlined in this
announcement, Diageo believes that the terms and offer price of the Tender
Offer announced today are the terms and offer price that, under the
Regulations, should apply in respect of the Tender Offer. However, it is
possible that SEBI may require the terms and conditions of the Tender Offer to
be modified or the Tender Offer price to be increased, and it is possible that
any such modifications to the terms or conditions of the Tender Offer could be
material or that the aggregate cost to Diageo of any such increase in the
Tender Offer price could be substantial in the context of the aggregate value
of the USL Transaction. Prior to commencement of the formal SEBI review
process and dispatch of the letter of offer for the Tender Offer, it is not
possible to assess more definitively the likelihood, effect or amount of any
such potential modifications or increase that SEBI might require.
In addition to the uncertainties relating to the terms and price of the Tender
Offer described above, it is not possible to state definitively the timeframe
within which the Tender Offer would be implemented nor the timeframe within
which the final letter of offer, offer terms and/or price would be
definitively determined, as: (i) the statutory timing requirements in relation
to SEBI's formal review process and receipt of other regulatory approvals is
not absolute and can be extended; and (ii) if SEBI's decision or that of any
other regulator were to be challenged, additional processes, including
litigation, could ultimately be required to resolve the position and this
could involve a substantial period of time (in the case of litigation,
potentially a number of years). During the period of any such delay Diageo
would have no control over the operation of USL's business, and upon
definitive resolution Diageo Bidco would likely remain obliged to implement or
complete the Tender Offer on the terms and at the offer price confirmed or
determined as part of that resolution, together with, potentially, an
additional amount in respect of interest on the applicable offer price at a
rate to be determined by SEBI (in recent transactions an interest rate of 10%
per annum has been applied). In the event of any such delay, there can be no
assurance that USL or its business would remain in the same or similar
condition, compared to its current condition, at the end of any such process,
or that the conditions under the Share Purchase Agreement would be or remain
satisfied.
As noted above, completion of the Acquisition and the Preferential Allotment
are each subject to a number of conditions. Such conditions must generally be
satisfied or, where permitted, waived on or before 9 November 2013, failing
which the Acquisition and/or the Preferential Allotment will (absent extension
by mutual agreement or under the terms of the relevant agreement) be
terminated. Regardless of the outcome of the Acquisition and the Preferential
Allotment, Diageo Bidco may nonetheless be obliged to proceed with the Tender
Offer unless SEBI permits Diageo Bidco to withdraw the Tender Offer.
Accordingly it is possible that only the Tender Offer, and not the Acquisition
and/or the Preferential Allotment, will complete, in which case Diageo Bidco
would acquire a lower than anticipated level of interest in USL, with,
potentially, UBHL continuing at its present ownership level. In the event
that the Acquisition completes and Diageo Bidco does not hold a majority of
the ordinary shares in USL, UBHL has agreed in the Shareholders' Agreement
that members of the UBHL group which hold USL shares will, subject to limited
agreed exceptions, vote their shares at Diageo's direction. This voting
obligation will terminate upon the Diageo group reaching such a majority
position or otherwise at the end of the fourth full financial year of Diageo
after the date on which the Share Purchase Agreement completes.
The completion of the USL Transaction will require clearance from the
Competition Commission of India (the "CCI"). The regime governing such
clearances has only been in force from 1 June 2011 and, accordingly, there is
limited precedent as to how these regulations might be applied and how the CCI
might utilise the powers available to it pursuant to such regulations in
relation to the USL Transaction.
Following completion of the USL Transaction, Diageo expects to commence
implementation within the USL group of Diageo's operational and governance
standards as part of the USL group joining Diageo's international group. As
the principal operations of the USL group are located in India and are
geographically and operationally devolved within that jurisdiction, it is
possible that achieving Diageo's proposed implementation could involve
commitment of greater management time, cost and resources than expected, with
potential implications for the day-to-day operations of the USL business
units.
Next steps
Diageo intends to commence the formal SEBI review process promptly following
this announcement and, assuming that that process completes within a
reasonable timeframe, would expect to post the Tender Offer documentation to
USL shareholders during the fourth quarter of 2012, with completion of the
Tender Offer then being likely to follow (subject to satisfaction or waiver of
applicable conditions and the absence of intervening circumstances) during the
first quarter of 2013.
Subject to the satisfaction or waiver of the conditions described above and to
definitive completion of the SEBI review process, it is expected on the same
basis that the Acquisition will complete during the first quarter of 2013.
The Preferential Allotment is expected to be implemented during the first
quarter of 2013.
Further announcements will be made in due course as appropriate.
This announcement is not intended to and does not constitute or form part of
any offer to sell or subscribe for or any invitation to purchase or subscribe
for any securities in any jurisdiction. The Tender Offer will be made solely
pursuant to the terms of the letter of offer, which will contain the full
terms and conditions of the Tender Offer. Any decision or response in
relation to the Tender Offer should be made only on the basis of the
information contained in the letter of offer.
The release, publication or distribution of this announcement in certain
jurisdictions may be restricted by law and therefore any persons who are
subject to the laws of any jurisdiction other than the United Kingdom should
observe any applicable requirements. This announcement has been prepared for
the purpose of complying with the laws of the United Kingdom and the
information disclosed may not be the same as that which would have been
disclosed if this announcement had been prepared in accordance with the laws
of jurisdictions outside the United Kingdom.
Copies of this announcement and any formal documentation relating to the
Tender Offer are not being, and must not be, directly or indirectly, mailed or
otherwise forwarded, distributed or sent in or into or from any jurisdiction
where local laws or regulations may result in a risk of civil, regulatory or
criminal exposure if information concerning the Tender Offer is sent or made
available to USL shareholders in that jurisdiction (a "Restricted
Jurisdiction"). Persons receiving such documents (including custodians,
nominees and trustees) must not mail or otherwise forward, distribute or send
it in or into or from any Restricted Jurisdiction. Unless otherwise permitted
by applicable law and regulation, the Tender Offer may not be made directly or
indirectly, in or into, or by the use of mails or any means or instrumentality
(including, but not limited to, facsimile, e-mail or other electronic
transmission, telex or telephone) of interstate or foreign commerce of, or of
any facility of a national, state or other securities exchange of any
Restricted Jurisdiction and the Tender Offer may not be capable of acceptance
by any such use, means, instrumentality or facilities.
ENDS
For further information:
Media relations
Rowan Pearman +44 (0)20 8978 4751
Lisa Crane +44 (0)20 8978 4771
press.office@diageo.com
Investor relations
Catherine James +44 (0)7803 854550
Angela Ryker Gallagher +44 (0)7803 855003
Sarah Paul +44 (0)7803 856876
investor.relations@diageo.com
Analyst materials and conference call:
Presentation slides will be made available to download from www.diageo.com.
At 12.00 (UK time) Paul Walsh, CEO, Deirdre Mahlan, CFO and Ivan Menezes, COO
will be available to take your questions regarding today's announcement.
If you would like to ask a question during the live Q&A session, please use
the following dial-in numbers:
Live Dial-In
UK and International Toll - +44 (0)20 3140 0668
UK Toll Free - 0800 368 1950
USA Toll - +1 631 510 7490
USA Toll Free - +1 866 928 6049
Germany Toll - +49 (0)30 221 510 066
Singapore Toll - +65 315 80328
Confirmation code: 260648#
A transcript of the Q&A session will be available for download at
www.diageo.com on 12 November.
Conference Call Replay
UK and International Toll - +44 (0)20 3140 0698
UK Toll Free - 0800 368 1890
USA Toll - +1 877 846 3918
Germany Toll - +49 (0)6922 222 9033
Singapore Toll - +65 630 77656
Confirmation code: 388068#
Cautionary Note Regarding Forward-Looking Statements
This announcement contains certain forward-looking statements relating to the
financial condition, results of operations and business of USL and certain
plans and objectives of Diageo. These forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts. Forward-looking statements often use words such as "anticipate",
"target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope",
"aims", "continue", "will", "may", "should", "would", "could", or other words
of similar meaning. These statements are based on assumptions and assessments
made by USL and/or Diageo in light of their experience and their perception of
historical trends, current conditions, future developments and other factors
they believe appropriate. By their nature, forward-looking statements involve
risk and uncertainty, because they relate to events and depend on
circumstances that will occur in the future and circumstances could cause
actual results and developments to differ materially from those expressed in
or implied by such forward-looking statements. Although it is believed that
the expectations reflected in such forward-looking statements are reasonable,
no assurance can be given that such expectations will prove to have been
correct and you are therefore cautioned not to place undue reliance on these
forward-looking statements which speak only as at the date of this document.
In particular, no statement regarding earnings per share should be interpreted
to mean that earnings per share will necessarily be greater than those for any
relevant preceding financial period. Neither USL or Diageo assumes any
obligation to update or correct the information contained in this announcement
(whether as a result of new information, future events or otherwise), except
as required by applicable law.
Sources of information
The share prices of USL and Pioneer in this announcement have been taken from
the website of National Stock Exchange of India.
Foreign exchange calculations included in this announcement have been based on
the prevailing exchange rates as at 8 November 2012 sourced from Reuters (with
the INR:£ rate being INR 86.91:£1).
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQUGGPAGUPPUBB -0- Nov/09/2012 10:05 GMT
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