DIAGEO has resurrected its bid for a stake in the Indian brewer United Spirits in an effort to ramp up its interests in what is the world's biggest whiskey market.
In a statement to the London Stock Exchange yesterday, the company confirmed it was "in discussion with United Spirits Limited and United Breweries (Holdings) Limited in respect of possible transactions for Diageo plc to acquire an interest in United Spirits Limited".
Diageo, which employs about 1,700 people in Ireland, has held talks with United on and off since 2008, but there is now believed to be a strong incentive for the head of the Indian firm, Vijay Mallya, to sell.
If Diageo took control of United Spirits, it would need to offload the Indian company's Whyte & Mackay scotch whisky business to avoid anti-trust problems. Diageo is the world's biggest scotch whisky maker with about a third of the market.
Diageo shares rose sharply on news of the talks, as the deal would give them an even bigger foothold in India, which is now considered the No 1 whiskey and scotch market in the world. Unlike western markets, it is continuing to grow rapidly.
As well as being the biggest whiskey producer in the world, Diageo's Johnny Walker is the single bestselling Scotch brand.
Analysts were broadly positive on the possible bid.
"Emerging market sales would jump to 45pc of Diageo sales from 40pc now, and Diageo would gain a sizeable footing in what one day should be the world's largest Scotch market," said analyst Pablo Zuanic of broker Liberum Capital.
If Diageo acquired 25pc of United Spirits, it would have to launch a mandatory open offer for at least 26pc more of the company to bring its stake to 51pc.
"They have been holding talks since 2008, but this time the expectations are high that the deal will go through because Mallya is in a really tight spot," said V. Srinivasan, an analyst with Mumbai-based Angel Broking.
Shares in the giant drinks group closed in London up 1.8pc at 1,755.5 pence.
(Additional Reporting by Reuters)