Heineken takes a bigger swig of UB

Five years after Dutch brewer Heineken took a strategic 37.4 per cent stake in the Vijay Mallya-led United Breweries, it has increased its holding in India’s leading brewing company.

On Tuesday, Heineken took 1.35 per cent more in UB for Rs 275 crore (Rs 2.75 billion).

UB has a market capitalisation of Rs 20,500 crore (Rs 205 billion). Mallya’s stake in the company stands at 37.4 per cent stake.

Though he has said he doesn’t intend to cede control of the company, it is expected he might be forced to part with a large portion of his stake to reduce the debt of other UB Group companies such as UB Holdings and Kingfisher Airlines.

A few months ago, Mallya lost management control of his spirits company, United Spirits, to London-based Diageo.

Tuesday’s bulk deal purchase of 3,558,030 shares at Rs 772.9 apiece was through a market transaction.

The stake, offloaded by Citicorp Finance (India), was picked up by Heineken after months of speculation the Dutch brewer was eyeing a larger share of the company, which clocked a revenue of Rs 4,000 crore (Rs 40 billion) in 2012-13, net profit Rs 172 crore (Rs 1.72 billion) and margin of four per cent.

“This move by Heineken was anticipated. However, this does not alter the face of the company, as the control remains in the same hands,” said Nikhil Vora, managing director at IDFC Securities.

“It is expected eventually, Heineken would take a larger share in this valuable asset, which the UB Group may be pushed to monetise.”

Heineken has three directors on the UB board. Its stake in UB is largely through Scottish & Newscastle India, a wholly owned arm of Heineken UK, owned by Heineken SV, Heineken Group’s holding company.