Diageo Pays $75 million to Settle Dispute with Indian Drinks Baron
26 Feb 2016 --- Diageo, the maker of Johnnie Walker, has agreed to pay $75 million to the chairman of United Spirits to step down from his executive roles with the company, as it looks to draw an end to an acrimonious boardroom battle.
Vijay Mallya has agreed to step down as chairman and non-executive director of the Indian drinks business he sold to Diageo in 2012.
The deal will bring an end a feud between Diageo and Mallya who had previously refused to stand down from the board of United Spirits.
Diageo said it will pay the $75 million over a five year period to the 60-year-old Indian drinks baron and politician famed for his jet-set lifestyle.
The settlement also means that Mallya is prevented from buying shares in the company his father set up in 1951.
Ivan Menezes, Diageo chief executive said: “India is an exciting growth opportunity, and USL has the management team, strategy and capability to deliver on that opportunity. The agreement is in the best interests of both Diageo and USL and allows USL to building on its strong platform in one of the biggest spirts markets in the world.”
Mallya said: “The time has now come for me to move on and end all the publicised allegations and uncertainty about my relationship with Diageo and United Spirits Limited.”
Mallya relinquished management control of United Spirits in 2012 and sold the bulk of his shares to Diageo.
The dispute centres on alleged financial irregularities after Diageo questioned a loan by United Spirts to its parent company, which was controlled by Mallya.
Diageo tried to remove Mallya from the board but he refused to stand down.
Mallya is facing pressure to repay in excess of $1 billion in loans from banks due to heavy expansion of his business interests.
The resolution of the feud will be a welcome relief to Diageo, as it looks to tap into the riches of the Indian spirts markets which is worth nearly $20 billion.
Mallya is to be replaced by Mahendra Kumar Sharma, a non-executive director at United Spirits.
