Beer maker East African Breweries Limited (EABL) has signalled its intention to continue with the sale of prime assets, with the invitation of bids for a disused brewery and a prime piece of land in Mombasa.
The property, which sits on a six-acre piece of land in Mombasa’s Shimanzi Industrial Area, is on sale for a base price of Sh700 million.
“We have been instructed to seek offers in the region of Sh700 million, exclusive of value added tax,” property manager Knight Frank says in the sale documents.
This is the fifth year in a row that EABL is selling assets to help shore up its bottom-line.
The brewer is selling the Mombasa property as it moves to exit a leasehold agreement it has had with the Kenya Railways Corporation (KRC) for more than 60 years.
EABL, which is 50.02 per cent owned by UK’s Diageo, has recently sold several parcels of land, go-downs, its glass-making subsidiary as well as its Nairobi head office building in lucrative transactions that have helped spice up shareholder earnings.
The Mombasa facility, which was commissioned by colonial governor of Kenya Sir Evelyn Baring in February 1952, was one of two breweries (alongside the Kisumu plant) that EABL operated outside Nairobi.
The two factories were closed down to centralise production and distribution operations at the company’s Ruaraka headquarters in Nairobi.
Knight Frank described the Mombasa property as ideal for mixed-use development consisting of offices, retail outlets and logistics centre, manufacturing plant or roadside retail centre.
The property is located on Mombasa’s Makande Road – 1.5km from the Kilindini Port. Key facilities in the same locality include the National Cereals and Produce Board (NCPB) depot, Grain Bulk Handlers and other depots belonging to oil marketing companies.
Knight Frank says in the sale notice that the property is developed with an office block, a former brewing complex, bottling halls, workshops, warehouses and gate houses all measuring approximately 160,000 square feet.
“The property is currently vacant save for two base stations located within its precincts, one for Safaricom and the other for Airtel,” says the sale notice.
The property is currently held under a leasehold title from the KRC for a term of 72 years from January 1, 1977, meaning that there are 33 years left. EABL pays the railway firm Sh10 million in rent annually.
EABL management declined to comment on the transaction, insisting that the sale plan had entered a “closed period” pending release of half-year financial results later this week.
The impending sale of the old brewery adds to the string of disposals that EABL has undertaken in the past six years and which have greatly enhanced its financial performance.
The beer maker last July sold its Ruaraka-based headquarters to Tembo Sacco, a 2,400-member savings and credit co-operative society made up of current and former staff, for Sh675 million.
The building has since been leased back to EABL, which continues to use it as its headquarters.
In 2012, EABL sold 32 acres of land on Nairobi’s Thika Highway to London-based private equity fund Actis for an undisclosed amount.
The multi-billion shilling Garden City Mall now sits on the land. The beer maker has also disposed of a go-down in Nairobi’s Industrial Area to distributor Bia Tosha, the firm with whom it is currently locked in a contractual court dispute, for close to Sh100 million.
Besides, EABL has sold the former Castle Breweries plant on Thika Highway to Kimani Rugendo, the entrepreneur who owns Kevian Kenya Limited — the makers of the Afia juice brand — in a deal believed to have been worth Sh600 million.
In the year to June 2015, EABL booked a gain of Sh1.8 billion from the sale of another 15 acres of land (out of 60 acres of idle land at its Ruaraka headquarters) to an undisclosed party, boosting its earnings.
The firm’s management said at the time that it only needed about half of its vast land holdings for future expansion, an indication that more disposals were in the offing.
EABL also booked a Sh2.2 billion profit from the sale of Central Glass Industries (CGI) to a South African glass-making firm for Sh4.5 billion. It recorded a further Sh707 million from the sale of land at an undisclosed location.
UK-based brewing giant Diageo walked away with approximately Sh1.78 billion from the special dividends of Sh4.50 per share that resulted from this glass business divestiture.
EABL has maintained that the string of sales it has undertaken in the past years is in line with its plan to concentrate on its core business of making and selling alcohol.
“The property sales are in line with EABL’s strategic initiative that had been identified a few years ago with respect to disposal of non-core assets,” the brewer said in July in response to queries about the disposal of its head office.
“This strategy seeks to release capital invested in non-core assets to support necessary investment in core or production assets.”