By Razak Musah Baba
LONDON--U.K. alcoholic beverages company Diageo PLC (DGE.LN)
said Monday that Chairman Vijay Mallya has said he won't resign,
following a call to do so from United Spirits Ltd. over alleged
irregularities in company accounts.
Board members of United Spirits, which is majority-owned by
Diageo, asked Mr. Mallya to step down as chairman over the weekend,
after a PricewaterhouseCoopers inquiry into the company's books
allegedly found "improprieties and violations," according to a
person familiar with the matter.
Diageo in its statement Monday said the board of United Spirits
resolved that if Mr. Mallya refused to quit, it would recommend to
its shareholders his removal as a director and chairman of the
board.
Mr. Mallya has denied any wrongdoing and, in a statement,
described the PwC report as "full of half-truths and twisted
facts." He said he planned to challenge the report and continue as
United Spirits' chairman.
PwC has said it stands by its report and believes it to be of
the highest professional standards.
Diageo last year more than doubled its stake in United Spirits
to just under 55%, giving it strategic control over India's largest
spirits maker. As part of the deal, Mr. Mallya remained as
chairman.
In September, board members said they had ordered a probe into
whether funds had been "improperly advanced" to other businesses
run by Mr. Mallya before the Diageo deal in 2012. The PwC report,
which was compiled in March but isn't yet public, came in response
to the inquiry.
Diageo has previously said it has certain contractual
obligations to support Mr. Mallya continuing as nonexecutive
director and chairman of United Spirits, subject to certain
conditions and in the absence of certain defaults.
On Monday, Diageo said it will now consider its position under
its agreements with Mr. Mallya and United Breweries (Holdings) Ltd.
in light of the inquiry report and materials provided to it.
Diageo shares at 0702 GMT were trading 4 pence higher, or up
0.2%, at GBP18.75, valuing the company at GBP47.16 billion.
-Preetika Rana in New Delhi contributed to this article.
Write to Razak Musah Baba at razak.baba@wsj.com; Twitter:
@Raztweet
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