UBHL's sale of shares in USL void: Karnataka High court - Angel Broking

The Karnataka High Court has annulled United Breweries Holding's (UBHL) sale of its stake in United Spirits to Diageo. The High Court order has come in response to a winding-up petition filed by creditors against UBHL for dues of about Rs. 600cr, which is pertaining to Kingfisher Airlines. The High court order said that earlier company court order which allowed the share sale by UBHL to Diageo did not have the jurisdiction to do so. Diageo's 26.4% stake in USL includes shares it purchases from UBHL (6.9%), shares obtained from other UB group entities (2.22%) and shares obtained through preferential allotment (10%). The High court order has only cancelled the sale of share by UBHL to Diageo but has not declared the entire deal between UB group and Diageo void.

As a result of this court order Diageo's stake in USL would reduce to 19.5%. Although UB group and Diageo are expected to appeal against the order in Supreme Court, we believe it would act as an overhang on the USL stock. The stock is expected to react negatively to the news in the short term. We continue to remain neutral on USL.

Source : Equity Bulls

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