The world´s largest alcoholics drinks maker, Diageo, is in advanced talks to buy a stake in Indian outfit United Spirits, four people with knowledge of the matter have told Bloomberg.

Such a transaction would fit in well with Diageo´s strategy of increasing its portfolio of emerging market assets; in fact, the company already has operations in the South Asian country.

Diageo, valued at £43bn, tried to acquire a stake in United Spirits, valued at £1.5bn, back in 2009 but failed after it was told that its offer was not at fair value.

So, what may have changed this time around? According to the news agency one of United Spirits' main shareholders, Vijay Mallya, needs to plug a large financing gap - of around £370m - in another one of his holdings, airline Kingfisher.

Significantly, as part of the deal, which is yet to be finalised, Diageo may get the right to appoint a majority of United Spirits' board members, including the Chairman, one person said.

The two companies may announce a deal by next month, said one of the people.

United Spirits' shares have doubled this year, and yet profit in the three months ended June 30 rose by just 5.3% while sales did so by 6.3%. Over at Diageo meanwhile sales grew 24% in the country in the year through June 30th, the company said, driven by "strong momentum across the Scotch portfolio."

A spokesman for United Spirits has denied the speculation.

As of 15:09 shares of Diageo are falling by 0.7% to the 1708p mark.

AB

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