Diageo targets Indian drinkers with $2 bn

British drinks group Diageo announced a $2.0-billion deal on Friday to buy up to 53.4 percent of India\'s leading spirits maker, giving it a commanding presence in the world\'s biggest whisky market. London-listed Diageo, which is expanding aggressively in emerging markets, is to initially buy a 27.4 percent stake in United Spirits (USL), which will trigger a public offer to other shareholders. The offer for a further 26 percent, taking the total shareholding to 53.4 percent for an estimated outlay of £1.285 billion ($2.1 billion), will see USL investors paid 1,440 rupees a share. The acquisition throws a financial lifeline to USL\'s Indian boss Vijay Mallya, whose business empire spanning Formula One and fertilisers has been hit by the near bankruptcy of his Kingfisher Airlines. \"I am delighted at the opportunity Diageo has to be part of India\'s large and growing local spirits market,\" said Diageo chief executive Paul Walsh in a statement. \"As a result of the agreements we are announcing today we will be well positioned to take the growth opportunities presented by a spirits market where growth is driven by the increasing number of middle-class consumers.\" Analysts say Diageo, owners of a large scotch portfolio including Johnnie Walker, will gain a significant foothold in India\'s lucrative local spirits market, where it trails global rival Pernod Ricard of France. Diageo, the world\'s biggest distiller, owns brands including Baileys liqueur, Captain Morgan rum, Guinness stout, Smirnoff vodka and Tanqueray gin, in addition to Johnnie Walker, a popular tipple at upmarket Indian social gatherings. The British brewing giant has recently completed takeovers of other emerging market companies including Turkish spirits group Mey Icki and Ethiopian brewer Meta Abo. United Spirits is India\'s second-largest maker of alcoholic beverages by market value and its biggest spirits maker, producing brands including McDowell\'s No.1 whisky, Romanov vodka and Four Seasons wines. Cigar-puffing Mallya, a one-time billionaire known for his brash style and ostentatious lifestyle, has seen his business reputation battered by losses at Kingfisher Airlines, which has debt estimated at $2.49 billion. Last month India\'s aviation regulator suspended the flying licence of the airline citing safety concerns. Kingfisher\'s planes have not flown since October 1, following a pay dispute with workers. Mallya, who took over his father\'s business, will remain chairman of United Spirits, as well as of his own holding company, Bangalore-based United Breweries Group. \"I have not sold any family silver or jewellery. I have only embellished them,\" he told reporters on a conference call on Friday. Jigar Shah, head of research with Kim Eng Securities in Mumbai, said that Diageo would vastly expand its distribution network in India. \"This is a big market that Diageo was missing out. They now get a foothold into a market which is one of the fastest and biggest in the world,\" he said. Jagannadham Thunuguntla, head of research with SMC Global Securities, said: \"The entire UB group was going through tough times. This is the last hope for Mr. Mallya to organise, restructure and energise group companies better. \"Companies like United Spirits, though with debt, are not available for sale every day. But Diageo is paying top dollar for it, it is not coming cheap.\" United Spirits is India\'s leading spirits maker with market share of 53 percent in India and 5.2 percent globally, according to Kim Eng Securities research. In India, unbranded, home-produced cheap liquor is the most popular drink, with a 48 percent share of the country\'s total alcohol market, the Kim Eng report states. Branded \'brown alcohol\' drinks -- whisky, rum and brandy -- account for a 36 percent share, while beer and imported drinks make up the rest. Whisky is the most popular branded alcohol, with a consumption of 137 million cases -- each case comprising nine litres -- in fiscal year March 2011. This is projected to grow by 46 percent to 201 million cases by 2015, the brokerage report says. But the per capita consumption of domestic-branded alcoholic drinks in India is still low at three litres per annum. The report said London-based market research firm International Wine and Spirits Record (IWSR) forecasts this to rise by 12 percent for the next three years as Indians shift to branded alcohol due to rising disposable income. The Indian spirits market is expected to grow 5.6 percent each year in volume between 2011 and 2017, according to the IWSR.