By Ben Bouckley 30-Jan-2013
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| Two of United Spirits' leading brands (Picture Copyright: Diageo) |
The potential upsides in Diageo’s potential acquisition of a majority stake in India's United Spirits (USL) are clear but achieving acceptable profitability from the business may be tricky, according to one analyst.
Diageo took a 27.4% stake in USL last November, and had planned to launch an open offer to shareholders to take a further 26% stake in the firm by January 18, where both transactions would total $2.1bn.
This last move is currently on ice due to Indian competition concerns, and Diageo is due to update shareholders on the situation when it releases its half-year results tomorrow.
But presuming that transaction does go through, Ross Colbert, an analyst on Rabobank’s Food & Agribusiness Research and Advisory Global Beverages Sector Team, said that Diageo’s acquisition was a clear example of “opportunities and challenges in emerging markets”.
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