Scorpio

Diageo and United spirit deal

Before

Benefit:

* India is one the most important and significant market for beverage .United spirit is 3rd largest player in this business. It will enhance their presence in India and add significant impact in sales.

* United Spirits is a very successful business and it bring skill and competency in alcoholic beverage market.

* It bring strong supply chain base and strategic alliance between the two make global presence stronger.

* USL have unbeatable distribution network in India, so Diageo will be benefited.

* USL is the largest spirits company globally by volume, and is controlled by UB Group Chairman Vijay Mallya. It owns brands such as McDowell's whisky, Black Dog scotch and Vladivar vodka.

* Diageo Plc, headquartered in London, is the world's largest distiller by value. It had revenues of 10,762 million pounds in the year ended June 30, 2012. The multinational company has offices in about 80 countries and employs about 25,000 people. North America accounts for 33 per cent of its sales followed by Europe with 28 per cent.

* So this deal will give great market for USL globally for its brand like McDowell’s whisky and Vladivar vodka etc.

* Due to debacle of Kingfisher airline which is part of Mallya group .So Mallya needs money to clear its debt by selling share of USL.

* In US and UK market Diageo market share is stagnant .So to join the growing market of India, company needs some acquisition.

Challenges:

* The companies of India are complex organisation to integrate. At the end of March 2012 USL employed 6200 staff (around 25% of Diageo) .Manufacturing sites are functioning in 29 location. So acquiring USL will increase overhead cost and minimise the profitability.

* Diageo have to deal with USL lower profitability with compare to rival. USL market share is decreasing since 2010.

* According to SEBI rule, Indian company when acquired by other company by 25...