Diageo, the world's largest spirits company by value, has mandated investment banking firm JM Financial to negotiate a deal that could result in it owning a minority stake in Vijay Mallya-owned United Spirits.Negotiations are underway to structure a deal that would arm Mallya with enough cash to revoke pledges on shares of United Spirits, the flamboyant tycoon's flagship company. In return, Diageo will get the right to buy shares in United Spirits equivalent to the amount paid to Mallya, according to a person familiar with the proposed transaction.The deal is in its initial stages and there is no certainty of a successful conclusion, the person said. The structure of the transaction, including the manner in which Diageo would acquire shares, which may include an open offer, is still being worked out, he said.If a deal were to be consummated, Diageo is likely to pitch for a reasonable stake, possibly 26%, in United Spirits. The company had a market capitalisation of 9,100 crore at Tuesday's closing. It hit a peak of 20,960 crore on October 4, 2010.Mallya denied he was considering a stake sale in his core business while Diageo described talk of a deal as "speculation"."As a matter of policy, we do not comment upon market rumour or speculation," said Stephen Doherty, global head of communications at Diageo Plc.
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