SOUTH AFRICA – Heineken has received the final regulatory approval to take over the world’s second-biggest producer of ciders, Distell, from the South African Competition Tribunal even after South African Breweries filed an objection to the takeover, preferring Distell to sell off cider brands like Hunter’s or Savanna as part of the deal.
The decision marks the final regulatory approval, following those received from the Namibia Competition Commission, the Common Market of Eastern & Southern Africa, and all other relevant jurisdictions.
In November 2021, HEINEKEN announced its intention to acquire control of Distell and Namibia Breweries Limited (‘NBL’), which were to be combined with HEINEKEN South Africa (‘HSA’) into a new HEINEKEN majority-owned business (Newco).
Later, in September 2022, the South Africa’s Competition Commission cleared Heineken on condition that the company sells its Strongbow cider business in South Africa and other countries that are members of the Southern African Customs Union.
Commenting on the approval, Heineken’s CEO and executive board chairperson Dolf van den Brink, said: “We are delighted the competition tribunal has approved the deal. We are excited to bring together three strong businesses to create a regional beverage champion, with a unique multi-category offer to better serve consumers and customers, and create shared societal value across Southern Africa.”
“We are committed to being a strong partner for growth and making a positive impact in the communities in which we operate, and the proactive and comprehensive public interest package we have put forward is a testament to that.”
Strongbow competes with Distell’s Hunter’s Dry and Savanna brands in the South African market, which led the Competition Commission to rule that the merged entity will have a significant market share, “substantially” lessening competition in the cider and flavored alcoholic beverages markets.
The commission and the merging parties agreed the sale of Strongbow shall be to “a credible and majority black-owned business” to promote new entry and transformation.
In addition, they also agreed to several public interest commitments, including R10 billion (US$586m) over five years to maintain and grow the productive operations in SA, as well as an employee share ownership scheme that would transfer more than R3 billion equity to its local workers.
Other investments include establishing an R400 million supplier development fund to invest in small businesses, an R200 million (US$11.7m) contribution to promote localization and growth initiatives within the country and invest R175 million (US$10.26m) in a tavern transformation program to create safe, responsible, and sustainable businesses with a positive impact on consumers and society.
Further to that, there will be the establishment of an Innovation, Research, and Development Hub for the African region based in South Africa within five years.
To address employment concerns in South Africa, the merging parties agreed to maintain aggregate employee headcount for five years following the merger and not to retrench any employees below specified managerial grades, which include the bargaining units.
The merged entity also committed that, in the event of any retrenchments, to consider retrenched employees for suitable vacancies in Newco for three years following the merger.
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