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Diageo (DGE.L) said Wednesday that its United Spirits unit agreed to divest its holding in Royal Challengers Sports for 166.6 billion Indian rupees as part of a strategic pivot to prioritize its core alcohol business.
Following a strategic review, the British alcoholic beverage company’s 55.9%-owned subsidiary entered a definitive agreement to sell 100% of its stake to a consortium including Aditya Birla Group, The Times of India Group, Bolt Ventures, and BXPE, Blackstone’s perpetual private equity strategy.
Royal Challengers Sports owns and manages the Royal Challengers Bengaluru teams in the Indian Premier League and Women’s Premier League. Once the transaction is finalized, the consortium will take over the franchise rights for both professional cricket teams.
Completion is subject to standard closing conditions and approvals from the Board of Control for Cricket in India and the Competition Commission of India. United Spirits Managing Director and Chief Executive Officer Praveen Someshwar said the deal will allow the group to unlock the “true potential with sustained growth” of its alcohol business.
RBC Capital Markets held a positive sentiment over the franchise sale, which it expects to close in six months.
“If USL simply hangs onto the proceeds, Diageo’s net debt/EBITDA would fall by around 0.2x, we estimate, as it would consolidate 100% of the proceeds given that it accounts for USL as a subsidiary. More likely (and more representative of what’s actually happening), in our view, would be a special dividend whereby Diageo would get its 55.9% share, taking about 0.1x off the ratio. Combined with the expected 0.25x reduction from the disposal of EAB, this should push net debt/EBITDA on a pro-forma basis below 3x at June 2026, versus our current forecast of 3.25x,” the research firm wrote in a quick-take report.
Diageo shares were over 1% in the green by Wednesday midmorning trade.