UB Woes

The market has been buzzing for quite some time with the news that USL was looking for a strategic investor to finance its recent Whyte and Mackay acquisition. However, Diageo may be looking at a higher than 15% stake in United Spirits limited (USL) and may even go for an open offer. As a strategic investor Diageo is looking more than just securing some board seats in the company. The company has a current debt of Rs 1162 crores. The market is also buzzing with the news that Kingfisher has had preliminary negotiations with Air France- KLM for a 20-25 per cent stake in the company. But Mr. Mallya is seeking a premium 4 times the current market cap. With the current FDI window at 49% in the aviation sector the government may allow foreign airlines to hold upto 26% directly, a move mooted to curtail the losses of the aviation sector which may cross a billion dollars this fiscal year.