TANZANIA – East African Breweries Limited (EABL), Diageo’s operating unit has raised its stake in Serengeti Breweries Limited (SBL) by 21.5% to build on its investment as a majority shareholder in the company.
According to the Nation, the East African brewing giant has converted US$151.98 million loan into equity to the Tanzanian subsidiary that was facing a debt burden.
Previously with a 51% stake, the new investment raises its ownership to 72.5% and provides Serengeti’s minority shareholders with an opportunity to restore their original 49% stake in the future by ceding half of their dividend entitlement going forward.
“On July 1, 2017, the company entered into an agreement with the non-controlling shareholders of its subsidiary, Serengeti Breweries Limited (SBL), to convert all its outstanding loans receivable to the subsidiary into equity shares, without proportionate capital contribution by the non-controlling shareholders,” EABL said in its latest annual report.
“The transaction resulted in an increase in the effective control of the subsidiary from 51% per cent to 72.5%.”
EABL acquired SBL in 2010 for US$48.67 million but has been facing antitrust issues in regard to the terms attached to the deal when the company acquired a controlling stake in Serengeti Breweries.
The new deal came after the brewer reached a settlement with the Tanzanian authorities with an undisclosed amount of fine.
It paid a US$28.80 million premium when it acquired the 51% stake in the company but has so far written off US$2.83 million of the premium known as goodwill, in a signal of weaker-than-expected performance of the subsidiary.
EABL reported 4.57% increase in revenue to US$731.8 million with strong sales in its spirits segment and bottled beer in Kenya and Tanzania.
In Tanzania revenue rose by 41% while sales stood at US$80.45 million in the year ended June, representing 11% of the brewer’s total sales of US$729.06 million.
SBL has the second biggest share of Tanzania’s beer market at 15%.