EABL to buy majority stake held by Diageo in Kenya spirits firm

EAST African Breweries Limited (EABL) is preparing to acquire the majority stake held by its parent company, Diageo, in a Kenya-based spirits firm.The deal will see EABL offer Diageo shares or cash in exchange for the 53.68 per cent stake held by Diageo in United Distillers Vintners (UDV) — giving the regional brewer full control.

The transaction will align UDV’s ownership structure to that of other EABL subsidiaries like Kenya Breweries Limited, Central Glass Industries and East Africa Maltings, which fully owned fully by the Nairobi bourse-listed brewer.

Details of the transaction including timelines and valuation remain sketchy because EABL expects to close the deal in the mid-term.

“This is an opportunity to clean up that structure,” said Charles Ireland, the EABL managing director, in reference to the UDV shareholding.

“There are various options for us to take full ownership which include making cash offer to Diageo or a share swap where we would issue more equity in EABL to Diageo.”

Diageo currently owns 50.03 per cent of EABL and the UK multinational has recently sought a larger share of the regional beer market including making a direct bid for an Ethiopian brewer.

UDV locally manufactures and sells spirits like Popov, Smirnoff and Gilbeys but also imports premium spirit brands like Bailey’s, Johnnie Walker and J&B Whisky through its parent company.

The spirits firm is one of the eight companies under EABL where regional brewer does not own a majority shareholding.

This means that EABL manages the spirits business, yet it’s a subsidiary of the parent company which books UDV’s sales in the London-listed firm’s financial statements.

EABL books the share of profits of UDV, which are not explicit in the brewer’s financial statements.

Diageo’s plan to ceded majority stake in UDV to EABL comes as the multinational increasingly eye new deals in the region.

In 2011, it made a direct bid for a state-owned brewer in Ethiopia, dashing the EABL’s hopes of entering the market. Diageo took part in a public auction of the Ethiopian brewer, Meta Abo, as it eyes rising incomes in Africa’s emerging markets and a larger stake in East Africa.

SOURCE: DAILY NATION