KENYA – Beer maker EABL is set to earn Sh4.5 billion from the sale of its subsidiary Central Glass Industries (CGI) in a transaction that is expected to boost the brewer’s cash position by reducing its debt.
EABL is transferring its 100 per cent stake in the glass-making firm to Consol Glass, a South African company.
In disclosures made in a shareholders’ circular, EABL said it will use the cash to partly repay a Sh19 billion loan ($200 million) that it borrowed from Diageo, its parent company.
“It has been agreed between the company (EABL) and Consol that the consideration payable in respect of the sale is Sh4.49 billion,” said the brewer in the circular sent to shareholders.
The transaction will see Consol supply EABL with spirits and beer bottles for at least five years.
The brewer has agreed to offer Consol management services for a maximum of one year at a fee.
“The purchase price payable by Consol is reflective of market value and constitutes a fair value for CGI. The board has considered and believes that the sale is in the best interests of the company and its shareholders,” read the circular.
EABL did not disclose the sale price when it made the negotiations public on April 1, only indicating that the transaction could be concluded by July subject to shareholder and regulatory approvals.
The beer maker took a loan from Diageo in 2011 to finance the buyback of a 20 per cent stake in Kenya Breweries Limited which it had earlier sold to its partner-turned-rival SABMiller.
The brewer has in the past indicated that it pays an interest rate of over 12 per cent on the loan, hence the urgency to clear it.
“The purchase price will be used by the company to reduce existing debt and in investing in its core beverage business,” EABL told its shareholders, who are now expected to okay the sale during an extra-ordinary meeting on May 27.
Consol is a privately-owned company with a manufacturing presence in South Africa and Nigeria.
It is the leading glass packaging manufacturer in southern Africa with clients like SABMiller, Distell, Heineken and Namibia Breweries.
May 13, 2015; http://www.businessdailyafrica.com/Corporate-News/EABL-to-earn-Sh4-5bn-from-sale-of-glass-firm-/-/539550/2714592/-/70vi1n/-/index.html
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