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An emergency meeting by the board of United Spirits has given the Indian drinks company’s biggest shareholder Diageo a headache today. The drinks giant and owner of the likes of Guinness and Smirnoff has been drawn into a bitter row between United and its former controlling shareholder and current chairman Vijay Mallya.
At the meeting, United’s board decided they wanted Mallya to step down as a result of allegations about financial transactions between the business and other parts of the chairman’s empire between 2010 and 2012. United Spirits’ financial results for the quarter immediately after Diageo finally secured majority control of the company last July were repeatedly delayed amid questions over a $225m loan the Indian spirits business had made to its former parent company, controlled by Mallya. The Indian tycoon has rejected the demand and is refusing to leave.
Diageo, which has a 55% controlling stake in United Spirits, said in a stock market statement this morning that it was reviewing its “contractual obligations to support Dr Mallya continuing as non-executive director and chairman”.
“Subsequent to its announcement on 25 April, United Spirits has provided its inquiry report and all related materials to Diageo,” the group added. “Diageo notes the recommendation of the United Spirits board and will now consider its position under its agreements with Dr Mallya and United Breweries (Holdings) Limited in light of the inquiry report and materials provided to it.”
Diageo’s (DGE) shares have opened 0.6% down this morning to 1,857p.
Morning update
It has been a quiet start to the week as the market takes a breath after the heady excitement and drama of last week’s momentous Tesco results.
Ocado (OCDO) has seen shares climb 2% since opening to 349.2p; Tesco (TSCO) has registered early losses, down 1.1% to 222.4p; and Majestic Wine (MJW) has dropped back slightly from massive gains made after the Naked acquisition – it is 1.9% down so far to 376.8p.
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