Diageo Acquires Majority Stake in USL*

            

Details


Case Code : CLBS130
Publication date : 2013
Subject : Business Strategy
Industry :Brewery Industry
Length : 03 Pages

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Abstract: ICMR India ICMR India ICMR India ICMR India RSS Feed

In November 2012, UK-based based beverages company Diageo Plc (Diageo) announced that it would acquire a major stake in India-based United Spirits Limited (USL), owned by UB Group.

The case describes the acquisition in detail.

Issues:

Acquisition as a growth strategy.
Inorganic growth.
The brewery industry in India.

Introduction

On November 09, 2012, the UK-based beverages company Diageo Plc (Diageo) announced that it would acquire a 53.4% stake in India-based United Spirits Limited (USL), owned by the UB Group, for Rs US$ 2.1 billion . According to the agreement, Diageo would initially acquire a 19.3% stake in USL at Rs. 1440 per share, 12.8% from the share capital of USL, and another 6.5% from the USL Benefit Trust, two subsidiaries of USL and the SWEW Benefit Trust . After this, the UB Group would have a share holding of 14.9% in USL....

Questions for Discussion:

1. What were the benefits of the agreement for USL and Diageo?.
2. What strategies should Diageo adopt to make its mark in the Indian market?
3. How can Diageo introduce its premium brands in the cost-conscious Indian market?
4. What are the challenges that lie ahead for Diageo in conquering the brewery market in India? Discuss in detail.

Key words:
Diageo, United Spirits, Vijay Mallya, United Breweries Holding Limited, Royal Challengers Bangalore, Formula 1, Wolff Olins, Whyte & Mackay, Johnnie Walker

Note
* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.