Nearly three years after selling a majority stake in United Spirits Ltd (USL) to Diageo, Vijay Mallya the controversial business tycoon has finally resigned as the Chairman and Director of the company. M K Sharma, the Chairman of ICICI Bank Ltd who was an independent director on the board of USL has taken over as the new Chairman of the company.
Mallya had sold a majority stake in USL to Diageo in July 2013. Abanti Sankaranaryanan, spokesperson for Diageo said the understanding with Mallya brings to an end the 'uncertainty relating to the company's governance as well as the ambiguity relating to certain historical transaction that were voted down by company's shareholders in November 2014.'
As a part of the understanding Mallya has agreed for a global five year non-compete, non-interference and standstill agreement except for the UK market. The Diageo spokesperson didn't explain why UK was made an exception. Diageo is likely to pay a consideration of $75 million to Mallya for the no-compete pact spread over 5 years including $40 million in the first year. Mallya is also barred from acquiring USL securities during the next 5 years as a part of this understanding.
In April 2015, the board of USL had asked Mallya to step down alleging a Rs 1337 crore diversion according to a PwC audit it had ordered, accusing the previous management lead by Mallya. Interestingly Diageo now says all those issues stand 'as resolved and we have been legally advised that we need not seek the consent of the minority shareholders for the same.'
Mallya has been declared a wilful defaulter by a few banks which are trying to recover nearly Rs 7000 crore lent to him for his now grounded airline Kingfisher. Diageo spokesperson said the understanding frees up USL management to go after 'India's big opportunity as it is one of the most exciting alco-bev market in the world.'
There was however no clarity on what happens to the residual nearly 5% stake that Mallya holds in USL.