Mallya's Golden Handshake
Published on Thu, Feb 25,2016 | 23:53, Updated at Thu, Feb 25 at 23:55Source : Moneycontrol.com
The Vijay Mallya – Diageo – USL battle has taken a most curious turn. Diageo announced today that it is paying Mr. Mallya $75mn to resign. In exchange Mr. Mallya signs a 5 year non-compete (excluding UK) and agrees to not pursue any claims against Diageo, USL and their affiliates.
Diageo has also agreed that Dr Mallya will have ‘no personal liability to Diageo in relation to (i) the findings of the inquiry by USL (announced on25 April 2015) into certain matters referred to in its financial statements and the qualified auditor's report for the financial year ended 31 March 2014 (the "USL Inquiry"), and (ii) its prior agreement with Dr Mallya regarding his position at USL.
Diageo has also released Mallya from his personal obligation to indemnify
- A $141 mn guarantee extended and paid by a Diageo group company to Standard Chartered towards a loan extended to a Mallya entity. Diageo says it is entitled to the security underlying the loan.
- A $42 mn guarantee extended and paid by a Diageo group company to Standard Chartered towards a loan extended to a Mallya entity. While there is a counter-indemnification here Diageo says it is unlikely to result in any meaningful recovery
Diageo has also agreed to give Siddharth Mallya a seat on the board of the USL group company that holds the Royal Challengers Bangalore IPL franchise. Mallya will not be removed for 2 years.
Vijay Mallya will get the title of Founder Emeritus – USL after he resigns. He also can acquire up to 13 USL properties in India at a 10% discount to fair market value
Now contrast this sweet deal with the events of the past 2 years!
Several month delay in finalising USL financial accounts for FY14
Rs 4000 cr write down at USL, a substantial portion of which pertains to loans/outstandings involving Mallya entities
Severe auditor qualifications to USL’s FY14 accounts and in subsequent quarters
Vijay Mallya tagged as Wilful Defaulter. He contests that in court
USL public shareholders vote against all Related Party Transactions with Mallya entities
Internal inquiry conducted by USL MD & CEO to look into financial transactions between 2010-2013
Thereafter USL Board asks Vijay Mallya to step down. The company’s release notes
‘The inquiry prima facie revealed that between 2010 and July 2013, certain transactions entered into on behalf of the company appear to have been undertaken to show a lower exposure of the Company (and its subsidiaries) to United Breweries Holdings (UBHL) than that which actually existed at the relevant time that is prior to July 2013.’
‘…the directors noted that they had lost confidence in Dr. Vijay Mallya continuing in his role as a director and as chairman and therefore, the Board called upon Dr. Mallya to resign forthwith as a director and as the Chairman of the Board…’
‘In the event Dr. Mallya declines to step down, the Board also resolved that it would recommend to the shareholders of the Company, the removal of Dr. Mallya as a director and as the Chairman of the Board.’
So on the one hand Mallya is under scrutiny for financial irregularities and is asked by the USL Board to step down. On the other, USL’s majority shareholder Diageo pays $250m Mallya to step down and absolves him of any obligation to them for any financial irregularities involving him.
Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.