The much-touted United Spirits (USL)-Diageo deal, which has been in the news for months

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together, will not be sewed up even in this quarter. The two concerned parties are continuing to have difficulty over reaching an agreement on the deal structure.

UB’s chief financial officer Ravi Nedungadi told Financial Chronicle that the USL-Diageo deal could be likened to that of the Bharti-MTN talks. “It’s very complex and could be a long-drawn out process,” he said.

“We at UB expect the deal to be concluded, but not in a hurry,” Nedungadi added.

Since last November, United Spirits, the spirits arm of UB group, has been in talks with Diageo. Diageo, the world's largest spirits company, is looking to expand its presence in India, while Vijay Mallya is looking to deleverage the balance sheet of USL by offloading over 15 per cent stake in the company. The total outstanding debt of USL is estimated to be about Rs 6,700 crore and the company is desperate to reduce that by offloading the stake.

An industry official, who was earlier with Diageo, told Financial Chronicle, “The dispute at present is about the extent of management control, representation on the board and sales and marketing roles for the popular brands of the two companies,” said the official, who is employed with an independent liquor importer and distribution company.

A lot of work is happening in the background quietly and it is just a matter of time before the deal gets through, said the official, who did not wish to be identified. “The fact that Vijay Mallya’s son, Siddarth Mallya, is working in Diageo is an indicator,” he added.

In February, Financial Chronicle had reported that the deal will not go through in financial year 2009, when other reports suggested that the deal was imminent.

Meanwhile, US-based private equity player Kohlberg Kravis Roberts & Co (KKR) is also believed to be eyeing about 10 per cent stake in USL.

According to the industry official, the stakes are much higher for Diageo. “For Diageo this deal is not about valuations as much as it is about long term value. Diageo is looking at gaining the distribution bandwidth that USL commands in the domestic market, the manufacturing base it has and the market share of its popular brands. So even if KKR buys 10 per cent stake in USL, Diageo will eventually buy the KKR stake as well,” he said.