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Diageo and Vijay Mallya: At the End of the Affair?

As DRT refuses to give Mallya access to Diageo money, we trace the timeline of the UB-Diageo collaboration.

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Business
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The Debt Recovery Tribunal (DRT) has passed an order keeping the Diageo money out of liquor baron Vijay Mallya’s reach for now. The DRT has ruled that Mallya cannot withdraw the $75 million he received from Diageo to quit the liquor business, until the case is disposed of. The tribunal has set the next hearing of the case for 28 March.

Here’s a look at Vijay Mallya’s association with Diageo. It began with a deal that was signed between Diageo and the United Breweries Group in November 2012.

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November 2012

  • Diageo agreed on a deal to acquire a 53.4 percent controlling stake in United Spirits from Mallya’s UB Group for Rs 111.7 billion (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.

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.

April 2013

  • Mallya was told he must provide a personal guarantee of Rs 5 billion (then US$91.9m) to obtain a four-week protection period against lenders hoping to sell a portion of pledged shares in United Spirits.

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”.

April 2014

  • Diageo announced it was forging ahead with its plans to take majority control of United Spirits, with the launch of a Rs 114.5 bn (US $1.9 bn) tender offer for a further 26% stake in the Indian company.
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September 2014

  • 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.

October 2014

  • 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.
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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 percent 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”.

May 2015

  • 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.
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July 2015

  • 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.

February 2016

  • Finally in February 2016, 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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