Heineken pleased with its partnership with Vijay Mallya

The world’s second largest brewer by revenue Heineken N.V. said its “pleased” with its partnership with beleaguered business tycoon Vijay Mallya. 

Fifty-nine-year old Mallya is the chairman of United Breweries Ltd (UBL), India’s biggest beer manufacturer and the maker of Kingfisher beer, in which Heineken has emerged as the single largest shareholder. 

Heineken’s contentment is a shot in the arm for Mallya, who has been facing the heat ever since his airline— Kingfisher Airlines— went bust in 2012-13. 

Moreover, recently, the board of another alcoholic beverage maker United Spirits Ltd (USL), now owned by Diageo, is seeking Mallya’s resignation from the company board and chairmanship. A USL board commissioned inquiry had found “various improprieties and legal violations” in certain financial dealings of the company when it was under Mallya’s control.

“Heineken remains very pleased with the business in India and the partnership with Dr. Mallya,” a spokesman of Heineken said in response to an e-mail query from Forbes India. 

On Tuesday, Heineken increased its stake in UBL from 38.9 percent to 42.1 percent, by acquiring 85 lakh shares from USL. The transaction (net of brokerage) was valued at Rs 872 crore. “As a long-term partner in UBL it made sense for us to buy them (the shares from USL),” said Heineken N.V.’s  spokesman Charles Armitstead. 

Heineken had inherited 37.5 percent shareholding in UBL post its acquisition of  the Edinburgh-based Scottish & Newcastle Plc, in 2008. Mallya had an equal shareholding in UBL, while continuing to oversee the business. 

However, in December 2009, Heineken had signed a new shareholders' agreement with Mallya and UBL, which gave Heineken a strong role in the governance of the Indian beer manufacturer. As part of the agreement Heineken got the right to nominate three members of the UBL board, including the executive position of chief financial officer.

But, Heineken’s increase in shareholding “does not materially change the ownership structure nor the nature of our collaboration. It is very much business as usual for all parties,” said Heineken’s spokesman. 

And added, "There are no changes being made to the UBL governance structure."

 

On Wednesday, UBL’s shares ended the day at Rs 1,009.55 a piece down 0.45 percent over the previous day’s close. Heineken paid Rs 1,030 a share to buy USL’s entire shareholding in UBL.