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Diageo in talks with India's United Spirits

Published:  28 January, 2009

Diageo has confirmed that talks are being held about the possible purchase of a stake in the Indian drinks giant United Spirits, headed by Vijay Mallya.

Mallya was reported in the Indian press as stating that talks with Diageo about selling a 14.9% stake were "in very advanced stages of negotiation".

Mallya and his senior team are due to meet top Diageo executives in New York on Wednesday.

Any bigger stake would trigger an Indian law requiring the buyer to make an offer for a further 20% of the company's shares.

A Diageo statement said: "There are discussions between Diageo and United Spirits but these discussions have not yet identified a structure which is acceptable to both parties. The discussions will continue but there is no certainty that they will result in a transaction between the two companies."

Mallya is keen to raise cash to pay off debts due within the next six months, avoiding the prospect of having to negotiate a restructuring with its banks.

Mallya is also planning to sell off a 49% stake in Whyte & Mackay, the Scotch whisky company bought in 2007.

In an interview broadcast on the Indian business news channel CNBC-TV18, Mallya said: "[Whyte & Mackay] has Scotch whisky inventories that have gone up by 47% in value since we bought the company.

"It's currently valued at £457 million. The Scotch whisky industry is facing a very buoyant situation and there should be no problem to unload 49% as long as we still keep control.

"There is something we are working on, but at the end of the day we will sell to the right investor at the right price."