The new deal builds on a previous 2003 venture between the brewers

S&N will buy a 17.5% equity stake in United, maker of the well-known Kingfisher lager brand, and make a public offer to buy another 20% stake.

A similar holding will be controlled by Vijay Mallya, chairman of the firm.

The deal was a "natural development" of its joint venture with United, said Tony Froggatt, S&N's chief executive.

Market share

Its top brands include Newcastle Brown Ale, Foster's, John Smith's, Strongbow and Kronenbourg.

In 2002 S&N and United agreed to form a strategic partnership, one that would include a joint venture business and a UK investment in the Indian brewer.

The joint venture was established in May 2003. with both parties having a 40% stake in the venture - Millennium Alcobev.

Millennium Alcobev will now be merged with United, which expects post-merger to have about half of India's beer market.

Brewery airline

India, with a population of more than one billion, consumes about 1.2 billion bottles of beer every year. Kingfisher has market share of about 29%.

In addition to the equity stake S&N is to invest 2.47bn rupees in United through non-convertible redeemable preference shares.

Meanwhile, United's budget airline, Kingfisher Airlines, is to buy 10 A320 aircraft from Airbus and has the option to buy 20 more aircraft in a deal worth up to $1.8bn.

The airline, the brainchild of Mr Mallya, expects to start its operations by the end of April.

The new airline would break even in the very first year of operation, Mr Mallya said.