Diageo’s open offer for acquiring up to 26% of shares in United Spirits (USL) has been delayed as regulatory clearances are still to come by.
The Rs5,441-crore open offer that was tentatively scheduled to have taken place between January 7 to January 18 has still to get approval from the Securities and Exchange Board of India (Sebi). According to a notification sent to the BSE by JM Financial Institutional Securities, the lead manager to this open offer, the schedule of activities stands revised and a new one will be intimated in due course. “With respect to draft letter of offer filed with Sebi on November 27, 2012, we are awaiting the final observations from it and accordingly, the schedule of activities stands revised,” read the BSE notification. But going by processing status information on Sebi website as on December 28, 2012, a reply was awaited from the merchant banker.
According to sources, the company may also have not received clearances from other two regulators – the Reserve Bank of India (RBI) and Competition Commission of India (CCI). Though the exact reason for delays is not known, experts don’t see much of an issue.
SP Tulsian, an independent investment advisor, suggested that the delay is nothing out of the ordinary. “This has happened in other cases as well. They do take time in the case of acquisitions involving foreign companies... The stock should remain between Rs1,900 and Rs2,000,” he said.
The mandatory open offer is the final stage for completion of Diageo-USL deal worth over Rs11,000 crore. Shareholders of USL have already approved the 10% preferential allotment of shares at Rs1,440 per share, as per Diageo’s news release. Arun Kejriwal, director at Kejriwal Research and Investment Services, said the delay may have a short-term sentiment impact though the deferment has no material medium to long-term effect on its outlook. USL was down 1.44% to close at Rs1,910 on the National Stock Exchange on Monday.
Meanwhile, USL pledged its entire 3.21% stake in United Breweries on January 2, the latter said in a notification to the exchanges.