Mallya Will Have to Give Up Some Rights to Access Diageo Money
Will have to forgo USL chairman’s perks; cos related to him can’t make any future claims on USL
Kala Vijayraghavan &
Mumbai: Vijay Mallya can’t access the $40 million (about .₹ 260 crore) that British spirits maker Diageo paid and is lying in an escrow account until he dons the hat of a common shareholder of United Spirits and sheds perks that came with the company’s chairmanship. Under the terms of the deal for Mallya to step down, companies related to him can’t make any future claims on United Spirits, said two people in the know.
“He has to give up certain rights and privileges including business class travel expenses,” said one of them. “He is like another shareholder owning shares of the company.”
The $40 million is the first instalment of $75 million that Diageo earlier this year agreed to pay Mallya for stepping down from a company that he made India’s largest spirits maker after inheriting from father Vital Mallya. The next payment is due in 2017. Details of the deal aren’t publicly available.
Diageo executives said they didn’t have any update on the offer made apart from what was disclosed publicly. Mallya didn’t respond until press time on Thursday to an email seeking comment.
“There were several contractual agreements between Mallya and
Diageo not in public domain yet,” the second person said. “Mallya is not on the board of the company, but has a minority 4% stake and earlier as chairman had access to a number of Diageo-owned conveniences that have to be given up.”
The next installment of the pay- ment is sometime away, but that depends on whether market regulator Securities and Exchange Board of India (Sebi) comes in way or not, he added. Sebi had raised questions over Diageo agreeing to pay Mallya $75 million and sought clarification on the settlement.
Minority shareholders of United Spirits also questioned the deal. They are unhappy because they say they were not compensated while Diageo agreed to pay Mallya over and above the money paid initially to purchase a controlling stake from him.
“Diageo will be forced to include the minority shareholders of USL into the total consideration made,” said Anil Singhvi, founder director of proxy advisory firm Institutional Investor Advisory Services (IIAS).
“Diageo goofed up on the offer made to Vijay Mallya, absolving him of so many irregularities but did not bother to take note of USL shareholders. They may have to rework the offer to make another open offer to public shareholders of United Spirits,” he added.