KENYA – Diageo, the multinational alcoholic beverage company headquartered in the UK, through its wholly-owned subsidiary Diageo Kenya Limited, seeks to increase its stake in East African Breweries Plc (EABL) through the acquisition of additional shares.
According to the beverage maker, it has served notice on EABL of its intention to increase its equity stake in the company by means of a partial tender offer made to other shareholders of EABL worth Ksh 22.73 billion at a rate of Ksh 192 per share.
Diageo is EABL’s current majority shareholder with 395.61 million ordinary shares, representing 50.03% of the issued share capital of the East African entity.
In a tender offer, the owner of Guinness and Johnnie Walker brands highlighted that it seeks to acquire an additional 118,394,897 ordinary shares representing 14.97% of the issued share capital of EABL, bringing its total ownership to 514.003 million ordinary shares, which would represent 65% ownership.
Diageo has also disclosed that it doesn’t intend to make a takeover offer for EABL and will apply to the Capital Markets Authority in Kenya for an exemption from complying with the requirement to make a takeover offer.
In an official communique, the London Stock Exchange and the New York Stock Exchange listed entity revealed that its current indirect shareholding in EABL of 50.03% is lower than the average shareholding of approximately 66.9% held by multinational parent companies in listed subsidiaries in Kenya.
“It is also lower than the average shareholding for other listed subsidiaries of Diageo in Africa such as in Guinness Nigeria and Guinness Ghana Breweries Limited where Diageo indirectly hold 58.02% and 80.4% stake, respectively,” Diageo noted in a statement.
Further to that, Diageo stated that it does not intend to delist EABL from the Nairobi Securities Exchange following the completion of the tender offer, as it believes the interests of EABL shareholders and the broader public would be best served by EABL remaining a publicly listed company and available to be invested in by the Kenyan public.
Once all the necessary approvals have been obtained from the Capital Markets Authority, the tender offer will open on 30th January 2023 and will be open to holders of ordinary shares on the register of EABL on 16 January 2023.
“The proposed acquisition by Diageo Kenya of the additional shares is consistent with Diageo’s Africa growth and active portfolio management. The East African business continues to go from strength to strength and is expanding its reach at a pace.
“In addition, a resilient and adaptive approach by the East African business through the COVID-19 pandemic combined with vibrant eCommerce growth has cemented Diageo’s belief that this is an appropriate time to deepen its East African position
“This transaction will enhance Diageo’s exposure to the East African alcoholic and non-alcoholic beverage market and economy,” stated Diageo.
In the year ended June 2022, EABL more than doubled its profit to Ksh.15.6 billion (US$131m) from Ksh.7 billion (US$58.9m) in the financial year ended June 2021.
The 124% rise in bottom-line performance is primarily tied to the near full recovery of sales following the withdrawal of most COVID-19-related restrictions which had limited the operations of bars and entertainment spots.
Its net sales soared by 27 percent to Ksh.109.4 billion (US$920m) from Ksh.86 billion (US$723m) attained the previous corresponding period.
EABL is a regional leader in beverage alcohol with an exceptional collection of brands across beer and spirits.
Although the business is concentrated on three core markets of Kenya, Uganda, and Tanzania, its products are sold in more than ten countries across Africa and beyond.
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