SOUTH AFRICA – A new regional beverage champion is about to take over the Southern Africa market, with the combination of three strong businesses, perfectly positioned to capture significant growth opportunities.
Six months after first announcing its interest in a takeover of Distell, Heineken, the world’s second-largest beer manufacturing company has finally made a €2.2 billion (US$2.52 billion) offer for Africa’s leading producer and marketer of ciders, flavoured alcoholic beverages, wines and spirits.
The acquisition of Distell will enable Heineken to explore new categories, adding to its portfolio brands such as Amarula, Hunter’s, Savanna, 4th Street, Klipdrift, Nederburg, Richelieu, Viceroy, and J.C. Le Roux.
In addition, it will extend and stamp Heineken’s presence in other African markets such as Botswana, Lesotho, Namibia, Eswatini, Nigeria, Ghana, Mozambique, Zambia and Kenya, where Distell has set base.
“This partnership has the potential to leverage the strength of Heineken’s global footprint with our leading brands to create a formidable, diverse beverage company for Africa.
“I am excited for what lies ahead as we look to combine our strong and popular brands and highly complementary geographical footprints to create a world class African company in the alcohol beverage sector,” said Richard Rushton, Distell CEO.
Spicing up the deal, Heineken intends to acquire control of Namibia Breweries Limited (NBL), the beer market leader in Namibia.
Heineken’s and NBL’s engagements started in 2003 when the alcohol manufacturers entered into a strategic partnership, with Diageo also being one of the parties.
The agreement saw Heineken – Diageo, acquiring 44% in NBL Investment Holdings Limited, which was being held by Interbrew, a division of Anheuser-Busch InBev (AB InBev). In addition, the two companies acquired a direct stake of 6.8% in NBL and as a result, Heineken and Diageo had an effective 28.9% stake in the brewery.
Later in 2015, the parties split, with Diageo taking full ownership of the spirit segment and selling its indirect stake in NBL to Heineken.
Under the new deal, the two businesses, Distell and NBL will be combined with Heineken South Africa, with a total valuation of approximately €4 billion (US$4.58 billion), into a new majority owned business.
The transactions which will be implemented through a number of simultaneous and inter-conditional steps, will involve acquisition of Heineken South Africa’s (HSA) 25% stake held by NBL which values the whole of HSA at approximately €1.5 billion (US$1.72m).
Further to that, the beer maker has made an offer to buy an additional 50.01% stake in NBL from its parent company Ohlthaver & List with a 59.4% shareholding.
Heineken already owns a 49.99% interest in NBL, whose market valuation is approximately €400 million (US$458m).
“What we have achieved with NBL is truly amazing, but the time has come to unleash its full potential, by giving NBL access to the world.
“Having worked with Heineken for many years and knowing that they too are passionate about beer and share similar family values and culture to that of O&L, we are confident that HEINEKEN is best placed to do just that,” said Sven Thieme, NBL CEO.
Dawn of a New Era
At completion of the deal with a cash pay-out of approximately €1.3 billion (US$1.58 billion) for the transactions involving Distell and NBL, the Dutch brewer will contribute these acquired assets plus its 75% directly owned shareholding in HSA and certain other fully owned export operations in Africa, into an unlisted public holding company referred to as Newco.
Heineken will own a minimum of 65% of Newco with a total investment of approximately €2.5 billion (US$2.86 billion), with the remainder held by Distell shareholders who elect to reinvest.
Combination of the businesses will have a significantly strengthened and complementary route to market in South Africa and Namibia, with further growth opportunities across Southern Africa.
It will also bundle up route-to-markets and portfolios in export countries, to increase efficiency and capture additional growth, especially in attractive markets like Kenya and Tanzania, and explore wider opportunities to grow the acquired cider and beer brands, such as Savanna and Windhoek, outside their home markets.
The new entity will better able to serve consumers and customers with a unique multi-category portfolio, led by iconic brands Heineken®, Savanna, Windhoek, 4th Street wine, Hunters and Amarula.
“Distell is a highly regarded, resilient business with leading brands, a talented workforce and a strong track record of innovation and growth in Africa. With NBL, there are exciting opportunities to expand premium beer and cider in Namibia and grow the iconic Windhoek brand beyond its home market.
“We have successfully built our business in Africa over 100 years. Today’s announcement is a vote of confidence in the long-term prospects of South Africa and Namibia and we commit to being a strong partner for growth and to make a positive impact in the communities in which we operate,” said Dolf Van Den Brink Chairman of the Executive board/CEO Heineken.
Brewing a better world
Heineken is keenly aware of the importance of economic transformation in South Africa through Broad-Based Black Economic Empowerment (“B-BBEE”) and intends to enhance the enlarged business’ empowerment ownership post completion of the Transaction.
The company is committed to be a partner for growth in Southern Africa and aims to make a positive impact on the environment, social sustainability, and responsible consumption in the communities in which it operates.
This will include ongoing investment in the business, employment, localisation and supplier development, talent development, and contribution to the economic development of the region.
Newco will also implement Heineken’s Brew a Better World 2030 commitments, which include an ambitious agenda aligned to the UN Sustainable Development Goals to achieve carbon neutrality, waste reduction, water efficiency and address harmful use of alcohol.
Completion of the Transaction between Heineken, Distell and NBL is subject to customary and applicable approvals.
If regulatory and shareholder approvals are successfully obtained, the Transaction is expected to complete in the course of 2022.
The Dutch group Heineken is the world’s second-largest brewer after Anheuser-Busch InBev, but its recent moves imply a possible shift in the game.
In West Africa, Heineken NV, launched a mandatory takeover bid for Nigeria based Champions Breweries, seeking to buyout the remaining 15.3% equity stake, while in India, it added India’s United Breweries Limited (UBL) to its expansive portfolio of brewing companies.