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4-Traders Homepage  >  Equities  >  London Stock Exchange  >  Diageo    DGE   GB0002374006

DIAGEO (DGE)
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Diageo : Sues 'King of Good Times' for Breach of Contract

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11/17/2017 | 06:19pm CEST
By Saabira Chaudhuri 

Diageo PLC is suing Vijay Mallya for breaching a deal he struck last year to cut ties with its India unit in return for millions of dollars, the latest twist in a yearslong saga between the Indian billionaire and the world's largest liquor maker.

The drinks giant behind the Johnnie Walker, Smirnoff and Guinness brands said it had filed legal proceedings in the U.K. High Court to claw back $40 million it paid to Mr. Mallya under the 2016 deal. The suit also seeks compensation from Mr. Mallya for the breaches and includes claims of about $141 million tied to a company affiliated with him.

Mr. Mallya, one of India's best known businessmen often called the "King of Good Times," said in a text message to The Wall Street Journal that he would "file a robust defense."

Diageo had hoped the 2016 agreement would close the book on a protracted and highly publicized conflict over alleged improper payments United Spirits Ltd. -- the Indian liquor business Mr. Mallya once chaired -- made to other businesses run by Mr. Mallya before the drinks company acquired it.

Mr. Mallya has previously denies any wrongdoing and has described these allegations as "full of half-truths and twisted facts."

Under the 2016 deal Diageo paid Mr. Mallya $40 million up front in exchange for his resignation from the board of United Spirits, with the promise of another $35 million over a five-year period. It also agreed to provide him with an honorary title and a noncompete arrangement.

Diageo over 2013 and 2014 bought a 55% stake in United Spirits for $3.2 billion, the largest food-and-beverage transaction in Indian history. But the pricey deal has been checkered by legal troubles, sparking criticism from investors who say it has become a big distraction.

Diageo is in the crosshairs of Indian authorities and entangled in multiple legal proceedings stemming from the acquisition. The authorities are looking into whether Mr. Mallya used the deal to launder money, and Mr. Mallya's creditors have sought the return of shares purchased by Diageo.

The London-listed company said in its annual report earlier this year that it didn't think it would be liable to pay Mr. Mallya the remaining $35 million under the 2016 contract "owing to various reasons," including breaches of the deal.

Write to Saabira Chaudhuri at [email protected]

Stocks mentioned in the article
ChangeLast1st jan.
DIAGEO 0.62% 2856 Delayed Quote.4.17%
UNITED SPIRITS 0.00%-End-of-day quote.-81.54%
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Financials (GBP)
Sales 2018 12 242 M
EBIT 2018 3 831 M
Net income 2018 3 126 M
Debt 2018 9 202 M
Yield 2018 2,32%
P/E ratio 2018 22,96
P/E ratio 2019 22,09
EV / Sales 2018 6,46x
EV / Sales 2019 6,24x
Capitalization 69 846 M
Chart DIAGEO
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Diageo Technical Analysis Chart | DGE | GB0002374006 | 4-Traders
Technical analysis trends DIAGEO
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TrendsBullishBullishBullish
Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 28,0  GBP
Spread / Average Target -1,4%
EPS Revisions
Managers
NameTitle
Ivan M. Menezes Chief Executive Officer & Executive Director
Javier Ferrán Chairman
Kathryn A. Mikells Chief Financial Officer & Director
Peggy Bertha Bruzelius Independent Non-Executive Director
Betsy DeHaas Holden Independent Non-Executive Director
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