UK Deficit Narrows, Diageo to Buy 53.4% Stake in United Spirits

Arthi Gupta
09 Nov, 2012
New York City

The UK indexes slid after deficit narrowed to

[R]2:10 PM London – The UK indexes slid after deficit narrowed to £2.7 billion in September and construction output fell 2.6% in the third quarter. Diageo agreed to acquire 53.4% stake in India-based United Spirits Limited. Warner Chilcott third quarter revenue fell 7%.[/R]

The UK indexes dropped after construction output declined in the third quarter and deficit narrowed in September.

Diageo agreed to acquire controlling stake in India-based United Spirits Limited in three steps that will hand over family control from Vijay Mallya.

Mallya’s risky and reckless bet on the airline Kingfisher has saddled the family with more than $1.6 billion in debt and string of losses from the start.

In London, the benchmark index FTSE 100 fell 48.89 or 0.9% to 5,726.38 and the pound edged lower to $1.5921.

For the week, the FTSE 100 declined 2.4%.

UK Deficit Narrows

The UK’s seasonally adjusted deficit on trade in goods and services narrowed to £2.7 billion in September compared with a deficit of £4.3 billion in August, the Office for National Statistics said today.

There was a deficit of £8.4 billion on goods, partly offset by an estimated surplus of £5.7 billion on services.

UK Construction Output Declines

The UK construction output declined 2.6% sequentially in the third quarter, the latest data from the Office for National Statistics showed today.

The construction output declined in seven of the nine sectors, with the largest decrease in private commercial with a fall of 8.2%.

Diageo Acquires Stake in USL

Diageo plc, United Breweries (Holdings) Limited and United Spirits Limited have announced agreements under which Diageo would acquire a 27.4% stake in USL, the leading spirits company in India. Diageo agreed to pay 57,254 million or approximately £660 million.

Diageo will also launch a tender offer at 1,440 rupees a share, a maximum of 37.79 million shares, totaling 26% of the enlarged share capital of USL.

On completion of the share purchases, Diageo will hold 53.4% of the enlarged USL share capital at an aggregate cost of 111,665 million rupees or approximately £1.29 billion.

In a complex deal, Diageo will acquire 12% stake in United Spirits from personal holding of Mallya and will acquire additional stake in the company by buying treasury stock and United Spirits will sell 25% preferential stake in the company to Diageo.

Diageo will follow up with an open offer to minority shareholders to acquire up to 15% stake in the company meeting securities regulation in India.

Gainers & Losers

Amarin Corporation plc slumped 4.5% to $10.26 after the biopharmaceutical company reported third quarter net loss of $26.4 million or 18 cents per share compared to net income of $96.3 million or 62 cents per share in the year ago quarter.

Beazley Group plc fell 1.1% to 169.90 pence after the provider of risk insurance and reinsurance products worldwide said its nine-month gross premiums written increased 9% to $1,470 million.

Jazz Pharmaceuticals Plc rose 1% to $53.25 after the specialty biopharmaceutical company reported third quarter total revenues surged to $175.52 million from $73.29 million in the prior-year quarter. Net profit rose to $33.21 million or 55 cents per share compared to $32.48 million or 69 cents per share last year.

Lonmin Plc dropped 0.9% to 448.80 pence after the platinum producer reported annual revenue decreased to $1.61 billion from $1.99 billion a year earlier. Pre-tax loss for the year was $698 million compared to a $293 million profit last year.

Rolls-Royce Holdings Plc gained 1.4% to 873 pence after the power systems provider said for the full year, the group continues to expect good growth in underlying revenue and profit.

Warner Chilcott plc rose 0.2% to $11.46 after the Irish pharmaceutical firm said third quarter total revenue fell 7% to $606 million from the previous year. Net income in the quarter soared to $113 million or 45 cents per share from $33 million or 13 cents per share, in the prior-year quarter.