Serengeti Breweries minority investors to raise US$30.8m in new deal

TANZANIA -Serengeti Breweries minority investors are set to inject an additional Sh3.2 billion (US$30.8m) capital into the breweries as part of it’s deal with the majority shareholder, East African Breweries (EABL).

The deal follows the conversion of the Sh15.3 billion (US$147.2m) loan into equity in a transaction that sought to ease the Tanzanian brewer’s debt burden.

It was also expected to dilute the interests of its minority shareholders whose equity currently stand at 49% by a large margin. This saw EABL’s stake in the subsidiary rise from the previous 51% to 72.5%.

Having announced the debt conversion, the company subsequently said Serengeti would remain unchanged without indicating circumstances that would hold down its ownership and further writing off Sh4.2 billion (US$40.4m) from the loan.

Tanzanian authorities opposed EABL’s acquisition and forced it to pay an unspecified fine to settle alleged flouting of takeover rules.

Following settlement of the dispute, EABL planned the restructuring of Serengeti’s balance sheet and said that its interest in Serengeti will revert to the original 51% in the future once Serengeti raises Sh3.2 billion (US$30.8m) from the minority investors.

In the report EABL states, “Under the terms of the arrangement, the non-controlling shareholders of Serengeti would pay the company Sh3.2 billion (US$30.8m) from 50 per cent of their dividends received from Serengeti,”

“Upon repayment of the liability through dividends, the effective economic interest of EABL in Serengeti would revert to the original 51 per cent status.”

The company further disclosed that the minority shareholders made an initial payment of Sh16 million (US$0.15m) or 0.5 per cent of the amount owed to Serengeti in the year ended June as reported by the Business Daily.

EABL, controlled by UK’s Diageo, sold its 20 per cent stake in Tanzania Breweries in 2010 and moved to buy a 51 per cent stake in Serengeti.

They paid a premium amount of 2.9 billion (US$27.9m) arguing that the it reflected the anticipated synergies and benefits of acquiring Serengeti’s customers.

During the financial year 2017 the management took a more conservative approach and opted to recognize an impairment charge on goodwill of Sh285 million (US$2.7m) following a weaker-than-expected performance in the brewer’s sales which stood at Sh6.2 billion (US$59.6m) in the review period, dropping from Sh7.1 billion (US$68.3m) the year before.

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