Heineken calls for Mallya to quit United Breweries

25th April, 2017 by Ron Emler

VJ Mallya is under intense pressure from Dutch brewing giant Heineken to relinquish his position as chairman of United Breweries.

Having inherited United Breweries (UB) from his late father, Mallya is facing a clamour to quit as chairman of the company that holds a 52% share of India’s beer market.

Dutch giant Heineken obtained a 37.5% stake in UB when it took over Scottish & Newcastle Breweries in 2008. Until then S&N had been a joint partner with the Indian brewer. At the time Mallya complained that the takeover raised questions of conflicting interests as it would give Heineken inside knowledge of UB’s strategy.

A compromised was reached, one condition of which was that Mallya would remain chairman of United Breweries for life.

But since then India’s stock market authorities have suspended Mallya from taking part in any market-related operations and from holding any responsible position in a quoted company. He is facing extradition to India over fraud allegations and has been declared a “wilful defaulter” over loans from 17 banks to prop up his failed Kingfisher airline.

Those are grounds that could be used to invalidate Heineken’s agreement with him.

Heineken now holds 43% of UB, giving it operational control of the company which has held several board meetings without a chairman since Mallya fled to the UK in March 2016. The Dutch group is also keen on the prospect of buying the 11% still held by Mallya’s umbrella company, UB Holdings. The courts could force Mallya to sell the stake to settle some of his debts.

However, just as in the case of United Spirits where Diageo ousted Mallya from the chairmanship last year, the battle is likely to be protracted. Heineken has asked Mallya to stand down but he has refused, protesting his innocence of any wrong-doing..

The option to pay off Mallya (Diageo agreed a $75m severance package with him) is not open now that he has fled India and his assets there have been frozen.

That leaves court action to oust him from the final jewel in his empire. Most commentators in India think that will not be long in coming.

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