Herbert Smith, Slaughters advise as Diageo buys majority stake in United Spirits

Herbert Smith Freehills (HSF) and Slaughter and May have landed roles on a deal that sees UK drinks company Diageo acquire a 53.4 per cent stake in India’s United Spirits.

The deal, worth £1.28bn, sees the UK beverages company behind Johnnie Walker, Guinness and Smirnoff buy a majority stake in United Spirits from liquor baron Vijay Mallya, a takeover that ends nearly four years of on-and-off negotiations.

Diageo will initially buy a 27.4 per cent stake in United Spirits, India’s biggest liquor company, before launching a mandatory offer for a further 26 per cent in the enlarged share capital. The UK-based drinks company turned to longstanding legal adviser Slaughters on the deal, led by London-based corporate partners Simon Nicholls, Robin Ogle and Padraig Cronin. Platinum Partners led for Diageo from India.

The parent company of United Spirits, which reportedly has a 43 per cent share of India’s whiskey market, turned to the Mumbai office of Amarchand Mangaldas & Suresh A. Shroff & Co for legal advice while Kanga & Co assisted on due diligence. For matters of English law HSF advised, led by London-based corporate partners Alan Montgomery and Roddy Martin as well as the firm’s India practice chairman Chris Parsons.

The deal will give Diageo a commanding presence in a country regarded as the largest whisky-drinking nation in the world.

“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,” said Diageo’s chief executive Paul Walsh in a statement. Mallya will remain chairman of the company.

Background to this deal:

Slaughters took a lead role alongside Cravath Swaine & Moore and Sullivan & Cromwell on Diageo’s potential acquisition of the tequila brand Jose Cuervo earlier this year (24 August 2012), with the Slaughters team covering UK advice led by corporate partner Tim Pharoah and tax partners Steve Edge and Sara Luder.

That deal followed Diageo’s £1.3bn takeover of Turkish spirits group Mey Icki in February last year (11 February 2011) where Slaughters corporate partner Kathy Hughes led alongside tax specialist Steve Edge, Brussels competition partner John Boyce and IP partner Susie Middlemiss.

Slaughters finance partner Stephen Powell also led for the client on its innovative 2010 scheme for reducing its pension deficit in which it placed maturing Scotch whisky worth more than £500m into a pension funding vehicle (12 July 2010).