Distell’s restructuring delayed as competition authority demands divestment

SOUTH AFRICA – Distell Group’s planned reorganisation of its control structure is set to delay after the Competition Commission made it clear that the approval was conditional on the Public Investment Corporation (PIC) selling 20% of the 26.8% it acquired in 2016 to a black economic empowerment (BEE) investor.

The firm stand by the commission has elicited mixed reactions, Chris Logan of Opportune Investments, a shareholder in Distell slamming the commission for being ‘overzealous’ in enforcing conditions.

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He said that while the commission has laid down strict conditions on Distell, the same have not been demanded from far larger competitors such as AB InBev, Diageo, Heineken and Pernod.

The company is also said to be experiencing slow growth for its share price, not reflecting progress in delivering on its growth strategy, according to an article by Business Day.

Distell announced a major restructuring of its multi-tiered ownership structure to a clearer and simpler shareholding structure, a move approved by its shareholders in October 2017.

According to the company, restructuring would improve the demand, liquidity and marketability of the new Distell shares and improve its investment appeal to both foreign and local investors.

With the transaction, Remgro an investment holding company remains a major shareholder; controlling 52.8% stake in combination with Capevin and Distell will become a wholly-owned subsidiary of New Distell and be delisted from the JSE.

For AB InBev to acquire SAB Miller in 2016 the Competition Commission required it to divest its stake in Distell and in 2017, the authorities approved the PIC’s acquisition of SAB’s Distell stake on condition that it divest of 20% of the 26.8% to BEE parties.

The commission has recommended approval of the transaction on condition that BEE investors receive 20% of its previous 26.8% stake in Distell.

It noted that although the proposed transaction was unlikely to significantly prevent or lessen competition, it would negatively affect the previously imposed divestiture conditions, thus may affect the public.

The commission further reiterated that because the PIC had swopped its Distell shares for shares in New Distell and because its stake in New Distell was diluted, the divestiture to the BEE purchaser would be negatively affected.

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