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Talks between Diageo, United Spirits still on: report
AFP - Sunday, May 10
NEW DELHI (AFP) - - India's United Spirits is still in talks to sell a stake to the world's largest liquor maker, according to a report Saturday.
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But Indian drinks tycoon Vijay Mallya said there were monopoly issues that must be resolved before a deal with Diageo could be concluded.
"Talks are very much on," Mallya was quoted by the Press Trust of India as saying.
But there are "structuring issues due to anti-trust or monopoly issues, which lawyers are addressing", he said.
Diageo announced last November it was considering a "possible collaboration" with United Spirits Ltd (USL), flagship company of Mallya's Bangalore-based UB Group, to raise its exposure to the fast-expanding Indian liquor market.
USL holds 55 percent of India's liquor market.
Foreign spirit manufacturers' ability to access the Indian market is hampered by import tariffs of up to 550 percent, depending on the Indian state.
Mallya originally announced he planned to offer Diageo a strategic stake of less than 15 percent but in February said he was willing to offer more if the global liquor company wanted.
Diageo, whose brands include Smirnoff, Johnnie Walker and Guinness, would have to pay at least 200 million dollars for a 15 percent stake in USL at current share prices, media reports said.
Separately Diageo was quoted as saying there was "no certainty" the talks would result in a deal.
India's Business Standard newspaper reported the monopoly concerns were believed to involve USL's Scotland-based scotch whisky unit Whyte & Mackay.
USL bought Whyte & Mackay in 2007 for 1.2 billion dollars.
The newspaper quoted an analyst as saying the combined volumes of Diageo and United Spirits in the scotch whisky and vodka markets could be significant if the deal went through.
Mallya has said the complexity of negotiations of such agreements due to regulatory issues mean they cannot be bound by a time frame.
Diageo operates in India through a unit that sells brands like Smirnoff. United Spirits is the worlds third largest spirits company by volume.
United Spirits is expected to use the money from any stake sale to lower its debt from its purchase of Whyte & Mackay.
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