KENYA – East African Breweries Plc (EABL) has faced the Senate Trade Committee to address concerns surrounding its recent acquisition of a 14.97 percent stake in the company by its parent company, Diageo Plc.
The transaction, which elevated Diageo’s ownership in EABL to 65 percent, has sparked controversy, with allegations of fraud and dubious dealings.
The hearing came in response to a petition filed in the Senate by Rono Nicholas and sponsored by Bomet Senator Hillary Sigei, who raised concerns over alleged fraudulent activities within EABL.
The petitioner claimed that the recent share acquisition by Diageo was part of a larger plan to transfer these shares to Heineken/Castel Group, effectively ensuring their control over EABL after the onward sale.
However, EABL’s Chief Executive, Ms. Jane Karuku, vehemently defended the legitimacy of the transaction.
She refuted the petitioner’s claims, asserting that the shares were acquired with the intent of selling them to a new buyer at a significantly higher value, thereby benefiting Diageo shareholders.
Karuku urged the committee to dismiss the petition as baseless and lacking credibility, emphasizing that there was no concrete evidence to support the allegations.
Karuku emphasized that, according to Diageo Kenya’s disclosures in the 2023 public tender offer, no agreements or arrangements were made to sell EABL shares to any other party.
She stressed that the petition had no legal or substantive grounds, urging the Senate to consider it as a false allegation.
The acquisition saw Diageo purchase a total of 118.4 million EABL shares at a unit cost of US$1.31, resulting in a total purchase price of US$155.3 million.
This transaction was conducted through a tender offer, inviting existing shareholders of the Nairobi Securities Exchange-listed firm to sell their holdings at the offer price.
During the hearing, Uasin Gishu Senator Jackson Mandago expressed concerns about Diageo’s recent divestment in its beer businesses across several African markets, citing countries like Cameroon, South Africa, Namibia, and Ethiopia.
He sought assurances from Ms. Karuku that these moves did not indicate a diminished interest in beer in favor of spirits.
In response, Ms. Karuku reaffirmed EABL’s significance to Diageo, asserting that the UK-based company had no intentions of offloading its shares.
She emphasized that the substantial investments made in Kenya signaled their commitment to the region and its potential for growth.
However, Busia Senator Okiya Omtatah challenged this stance, arguing that there was no legal clause preventing Diageo from selling its shares in the future.
As the Senate Trade Committee continues its deliberations, the controversy surrounding the acquisition remains at the forefront of public scrutiny, with stakeholders eager for a resolution.
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