Heineken eyes driver’s seat in UB by buying ED-seized Vijay Mallya shares

MUMBAI: Heineken has proposed to buy from the Enforcement Directorate (ED) Vijay Mallya’s unpledged shares in United Breweries as the world’s second-largest beer maker moves to secure complete control of India’s top beer producer, two people with direct knowledge of the plan said.

JM Financial, the investment bank appointed as adviser by Heineken International, recently submitted a share purchase proposal to ED. The agency had seized Mallya’s shares in connection with alleged loan diversion and default on payment of dues to banks. The shares are valued at about Rs 4,331crore at current market price of Rs 1,020 and comprise 15.2% in UB, the makers of Kingfisher beer.

The purchase will help the Dutch beer maker increase its stake to 58.2% from about 44% now. Mallya has 29.46% and the rest is with the public. The buyout, if it happens, will be a transfer of shares between interested parties and it need not make an open offer.

ED plans to raise more than Rs 4,000 crore by selling the unpledged UB shares, ET reported on January 19. The shares were transferred to the agency by the Stock Holding Corporation of India under the Prevention of Money Laundering Act. ED, which secured about 4 crore shares until January, seized an additional 27 lakh shares later.

According to the Prevention of Money Laundering Act, after an order of confiscation, all rights and title in such property vest with the central government. ED officials declined to comment. “ED will be following the standard procedures needed to raise the amount owed by Mallya to the lenders,” an official familiar with the development said.

A Heineken spokesperson did not respond to queries.

ED has attached Mallya’s assets, including shares, in connection with the money laundering case filed by the agency. Mallya’s 29.46% stake in UB comprise 7.79 crore shares, of which 45.2% are pledged to lenders.

Heineken has been increasing its stake in UB by purchasing pledged shares from local lenders. UB’s Articles of Association bar Heineken from buying shares from the market unless it is a bilateral deal. Mallya resigned from the UB board after the Securities & Exchange Board of India declared him ineligible as director of a listed company. The regulator’s decision came after lenders declared him a wilful defaulter.

UB has been forced to hold its board meetings without a regular chairman since the Sebi order, which Mallya is contesting. The Articles of Association between Heineken and Mallya entitles him to be UB’s chairman for life and remain a non-retiring director unless he nominates someone to replace him or steps down voluntarily.