SOUTH AFRICA – South African Breweries, a Johannesburg-based subsidiary of Anheuser-Busch InBev, has reportedly objected the Heineken’s takeover of Distell, questioning the strength of Heineken’s Strongbow brand and would prefer to see Distell sell off cider brands like Hunter’s or Savanna as part of the deal.
According to South African news outlet News24, the SAB presented its opposition at a hearing at the Competition Tribunal into the deal.
The company argued that the deal will result in the removal of an effective competitor in South Africa. SAB planned to give its evidence on Thursday following raising questions about the effectiveness of the sale of Strongbow.
The deal – announced in November 2021–received South Africa’s Competition Commission’s clearance in September on the condition Heineken sells its Strongbow cider business in South Africa and other countries that are members of the Southern African Customs Union.
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.
During the hearing on Wednesday, Jerome Wilson SC, acting on behalf of Heineken and Distell, reportedly said: “it is entirely unclear what interest SAB has, apart from the obvious interest in seeking to delay or frustrate the approval of the transaction”.
“SAB would prefer that the merger parties offer up other brands in the flavored alcoholic beverages (FAB) sector. The merger parties argue that the Tribunal must consider whether this is outweighed by the considerable public interest benefits of the transaction.”
Wilson further stated that the proposed merger is overwhelmingly positive for competition, justifying that the primary intention behind the merger is to enable Heineken and Distell to be able to compete more effectively with the leviathan in alcoholic beverages–AB InBev (SAB).
He underscored the merger entails the coming together of complementary product portfolios, distribution, and other arrangements, and will unlock economies of scale and scope to enable the merger parties to compete more effectively with AB InBev’s brands.
Under the acquisition terms of the agreement, between the merging parties with the DTIC, Heineken agreed to 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 a R400 million supplier development fund to invest in small businesses, a 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 programme 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.
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