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USL Open Offer - Incomplete Disclosures?

Published on Wed, Sep 16,2015 | 19:33, Updated at Wed, Sep 16 at 19:38Source : CNBC-TV18 |   Watch Video :

Every day we find out more about the fractured relationship between Diageo and Vijay Mallya. The last big headline was that the USL board had asked Vijay Mallya to step down as Chairman. He refused to do so! Recent disclosures have raised questions about the open offer price paid by Diageo when it first acquired USL. Proxy advisory firm SES says the open offer price did not include certain indirect benefits to Vijay Mallya. CNBC TV18’s Menaka Doshi talks to SES founder J N Gupta about that…

Diageo USL Deal
-Done in 2012-13
-Diageo open offer price: Rs 1440
-Deal makes brief mention of proposed Africa JVs with Mallya

SES ARGUMENT
-Diageo open offer price did not include indirect benefits to Mallya
- SEBI must investigate open offer price

SES ARGUMENT
- Diageo disclosures now show that Mallya expected 'significant financial benefits' from JVs
- These benefits have not been priced into open offer

SES ARGUMENT
-Diageo disclosures reveal it provided guarantee to $135mn loan to Watson (Mallya entity)
- Watson has defaulted on the loan
- Diageo says the security may not be fully recoverable
- Diageo says it cannot quantify loss
- SES says value of this guarantee/loss not priced into open offer

SES ARGUMENT
- Open offer price should include guarantee fee
- Open offer price should include contingent liability on account of guarantee
- Open offer price should include financial benefits promised to Mallya via JVs

The full SES report is attached here…
Attachments : USL_DIAGEO Open Offer 2013_Final.pdf
 
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