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E-Malt.com News article: India: Heineken unable to remove chairman Vijay Mallya despite owning higher stake in United Breweries
Brewery news

Dutch beer maker Heineken International is caught in a bind as it is unable to remove chairman Vijay Mallya from its Indian joint venture United Breweries (UB) despite owning a higher stake. The beleaguered billionaire is causing reputational risks to United Breweries due to his legal battles with lenders and investigation by government agencies for misappropriation of funds, the Economic Times reported on January 24.

Though Heineken owns a much higher stake than its partner at 42.4%, the Articles of Association (AoA) between the two shareholders states that Mallya will be entitled to be the lifelong chairman apart from a non-retiring director unless he voluntarily steps down and nominates one.

According to an agreement in 2009 between the two, Mallya has the right to choose his successor. A change in the AoA needs an approval from 75% of the shareholders.

Mallya’s financial problems and legal battles are posing reputational risks to United Breweries, said an official close to the development. “The board had earlier tried to convince Mallya to step down in the long-term interests of the organization.’’ Mallya had said he would not step down from the board until he is proven guilty in an Indian court.

Heineken declined to comment while Mallya did not respond to an emailed questionnaire. Heineken has been hiking its stake in the company from 37.5% in 2003 by purchasing shares in block trades from the stock market. Heineken, which also has the first right of refusal, is also open to a hostile takeover of the company. In 2016, Heineken purchased shares from ECL Finance, with whom Mallya pledged shares, in block trades.

Analysts said a complete takeover is ideal for Heineken and there are no concerns as the Dutch beer maker is in the driving seat with key financial position with them. “Though Mallya is termed as a ‘’defaulter’’ and wanted by the law, there is a professional team running the organisation,’’ an analyst tracking the consumer sector said. “Heineken is already in the driver’s seat in the company and focused on growing the business in India,’’ the analyst said.

“If it takes complete management stake it would be an ideal situation… However, there are no concerns even with the current leadership team since Mallya is not running the show,” he added.


24 January, 2017

   
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