LONDON -- Shares in Diageo (LSE:DGE) (NYSE:DEO) continued their upward trend, as news broke that the Indian Competition Commission has approved its 1.28 billion pound purchase of a stake in United Spirits.
India's antitrust body said that Diageo's majority stake in United Spirits "is not likely to have an appreciable adverse effect on competition in India," after Indian authorities questioned whether a put clause in the agreement was compliant with local legislation. This followed initial concerns that the deal would have an adverse impact on competition.
The Indian Competition Commission went on to say:
Diageo's acquisition of [United Spirits] may give a boost to the premiumisation strategy ... The combination may increase and improve consumer choice.
The proposed combination may bring new products and more variants of the existing brands at different price points which would ultimately enable the consumer to expand his choice set.
The deal proposes that Diageo will initially buy a 27.4% share in United Spirits through a combination of share purchase from existing promoters and preferential allotment of shares, and then launch a tender offer to purchase a further 26% of the company from public shareholders within five years.
The first signs of the deal being passed by the regulator emerged late yesterday and breathed new life into the shares, sending them up 35 pence, from 1,945 pence, to 1,980 pence.
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Sam Robson owns shares in Diageo. The Motley Fool recommends Diageo plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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