SEBI is not comfortable with certain provisions of the proposed offer from Diageo, including those related to preferential allotment of shares, and it fears that minority shareholders of United Spirits might be at a disadvantageous position under the existing terms of the deal

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has sought fresh clarifications from global liquor giant Diageo regarding its Rs5,441 crore open offer for stake purchase in UB group's United Spirits Ltd -- a development that could further delay the closure of this deal, reports PTI.

This is the second time in about a month that SEBI has sought clarifications from Diageo through the liquor major's merchant bankers, JM Financial, with regard to the proposed deal.

Sources said the regulator is not comfortable with certain provisions of the proposed offer, including those related to preferential allotment of shares, and it fears that the minority shareholders might be at disadvantageous position under the existing terms of the deal.

The bankers had submitted their reply to SEBI after the latter sought clarifications from them in December, but the regulator has now sought fresh clarifications from them.

As per SEBI's latest weekly status update of pending open offers as on 11th January, the "reply (is) awaited" from merchant bankers for United Spirits open offer.

UK-based Diageo had announced a deal more than two months ago on 9th November under which it agreed to acquire up to 53.4% stake in United Spirits for an aggregate amount of Rs11,166.6 crore.

As part of the deal, Diageo would acquire 27.4% stake for Rs5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. In addition, it had offered to acquire an additional 26% stake for Rs5,441.07 crore through an open offer for public shareholders.

Any acquisition of 25% or more stake in a listed company triggers a mandatory open offer for purchase of additional 26% stake from the public shareholders and the same needs to be cleared by the market regulator.

The proposed open offer for an additional 26% stake in USL entails purchase of about 3.8 crore shares at a price of Rs1,440 per share, totalling to Rs5,441 crore, by Relay BV, a wholly-owned subsidiary of Diageo.

The open offer was earlier scheduled to start on 7th January but it was postponed in absence of necessary regulatory approvals.

SEBI had received the draft letter of this open offer on 29th November.

An acquirer can go ahead with the open offer only after SEBI issues its "observations" on the same.

USL, the country's largest spirits company, is part of Vijay Mallya-led UB Group, whose aviation venture Kingfisher Airlines has been going through turbulent times for many months now and its licence is currently suspended.