Advisers earn Sh733m in Diageo-EABL deal

Beer production line at the EABL plant in Ruaraka, Nairobi. 

Photo credit: File | Nation Media Group

British multinational Diageo has disclosed that it spent £4 million (Sh733 million) on transaction fees when buying an additional 14.97 percent stake in EABL earlier this year, landing local firms that advised on the deal a healthy payday.

Diageo bought 118.394 million shares at a unit price of Sh192 in the oversubscribed offer, valuing the deal at Sh22.7 billion.

This raised its stake in the brewer to 65 percent from 50.03 percent. The London-based company executed the acquisition through its wholly-owned subsidiary Diageo Kenya, through which it holds its stake in EABL.

Offer documents list Stanbic Bank and its investment banking subsidiary SBG Securities as the financial advisers to Diageo Kenya in the deal. Stanbic was also the paying bank, and SBG the sponsoring broker and lead acceptance agent.

Law firm Coulson Harney LLP (Bowmans Kenya) was the legal adviser, while Image Registrars was the appointed data processing agent.

“On 24 March 2023, Diageo completed the purchase of 14.97 percent of the share capital of EABL for an aggregate consideration of Sh22.73 billion (£142 million) in cash and transaction costs of £4 million. This took Diageo’s shareholding in EABL from 50.03 percent to 65 percent,” said Diageo in its latest annual report.

Aside from the direct fees paid to the advisers, the transaction also generated millions of shillings in commissions for local stockbrokers and investment banks whose clients sold shares to Diageo.

Equities trade at the Nairobi Securities Exchange (NSE) normally attract a commission of up to 2.1 percent for transactions below Sh100,000, and a maximum of 1.7 percent for those above this threshold, inclusive of the regulator, custodial and bourse levies.

On paper, Diageo’s total spend of Sh22.7 billion would generate commissions worth up to Sh477 million for the market intermediaries, but this was likely lower given the room for negotiations.

Multiple market sources said that Diageo was responsible for paying the commission on the transfers of shares from the minority investors — with the deal described as a one-way transaction since it was a tender offer.

The sale was done in two phases from February 6 to 24, and between February 27 and March 17, with both phases posting oversubscription.

The block trade also had the effect of boosting the NSE’s monthly equity turnover to a record high of Sh32.37 billion in March.

Diageo’s move to raise its ownership in EABL is seen as a signal of its confidence in the brewer’s long term prospects.

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