The transaction will begin with the two-stage purchase of 27.4% of United Spirits for Rs57.25 billion. Diageo will first buy more than 19% from Vijay Mallya's United Breweries (Holdings) Ltd. and affiliated entities. If the target's shareholders approve a capital increase, Diageo will then subscribe for new shares equivalent to about 10% of the enlarged United Spirits' stock. A mandatory tender offer for up to 26% more of United Spirits will follow. Diageo will offer Rs1,440 per United Spirits share in all three transactions - a 7.2% premium to Thursday's closing price.

Diageo said it is paying the equivalent of 20 times United Spirits' Ebitda in the year ended March and that the purchase would boost its own earnings per share in year two.

The London company wants to derive 50% of net sales from emerging markets by 2015 to tap consumers' growing taste for higher margin, premium drinks.

"As a result of the agreements we are announcing today we will be well positioned to take the growth opportunities presented by a spirits market where growth is driven by the increasing number of middle class consumers," said Diageo CEO Paul Walsh in a statement. "USL's number 1 position in local spirits together with our growing international spirits business of leading brands will enable us to grow across the consumer space as India's increasing number of middle class consumers look to enjoy premium and prestige local spirits brands as income levels rise."

The agreement comes less than two months after the two sides confirmed discussions, with the outcome contrasting with the almost two years of unfruitful talks Diageo has held with the Beckmann family to take control of Mexican tequila brand José Cuervo.

Diageo's recent emerging-market deals include the 3.3 billion lira ($1.84 billion) purchase of Mey Içki Sanayi ve Ticaret AS from TPG Capital and Actera Partners LP in 2011, while in China it took control of the joint venture behind Shuijingfang Co. Ltd., a brand of baijiu, or white spirits, this past July. It also agreed in May to buy the Ypióca brand in Brazil for 900 million reais ($444 million).

Diageo said it will use existing cash and debt to help finance the purchase, which requires a raft of approvals including competition clearance in India and approval from India's takeover regulator.

If United Spirits' shareholders vote against the issue of a 10% stake to Diageo, United Breweries will sell Diageo more of its own stock to ensure that the U.K. company has a 25.1% United Spirits stake. And if the general tender offer leaves Diageo without a controlling shareholding in United Spirits, United Breweries will take direction for four years from Diageo on how it votes its shares, giving the U.K. company de-facto control.

Mallya, whose United Breweries owns the cash-strapped Kingfisher Airlines Ltd., will remain chairman of United Spirits. He also plans to put his South African sorghum beer interests into a 50/50 joint venture with Diageo, which will pump $36 million into that business. The two sides will also consider teaming up elsewhere in Africa and Asia.

United Breweries and United Spirits took advice from Citigroup Global, while Ambit Corporate Finance advised United Breweries on tax and structure-related issues.

Amarchand and Mangaldas & Suresh A. Shroff & Co. acted as lead legal adviser for the Indian companies. Herbert Smith Freehills LLP advised on English law and Kanga & Co. assisted with legal advice on the due diligence.

Diageo's financial adviseres were JM Financial, Bank of America Merrill Lynch and UBS.

Slaughter and May and Platinum Partners were Diageo's law firms. Deloitte LLP provided financial and tax due diligence services.

United Spirits shares were up Rs17.05 at Rs1,360.50 late afternoon on the National Stock Exchange of India. Diageo shares early afternoon in London were little changed at 1,799.5 pence. At that price Diageo's equity is worth £45.1 billion ($71.8 billion).