The Capital Markets Authority (CMA) has queried and pushed East Africa Breweries Limited (EABL) to explain the brewer's raising of Sh16.8 billion through a bond and the announcement of the exit of its parent firm within a span of 35 days.
The brewer closed the multi-bil-lion-shilling bond on November 12, and its parent firm, Diageo, announced Tuesday that it had agreed to sell its 65 percent stake in EABL to Japan's Asahi Holdings for $2.354 billion (Sh303.5 billion).
This sparked market speculation that EABL shepherded the bond with knowledge that Diageo was planning to offload its stake in the brewer listed at the Nairobi Securities Exchange (NSE), prompting regulatory action.
The CMA ordered EABL to issue a market notice on the proximity of the two transactions and whether it had knowledge of the deal between Diageo and Asahi, said sources who declined to be named because they are not au-thorised to speak to the media.
The exit of a majority shareholder is deemed material information that ought to have been made available to bond buyers if it was known to the company's board.
"The statement was issued on our prompting on the questions that were being raised about the matter," said a top executive at CMA, who asked not to be named because of the sensitivity of the issue, while adding that the regulator will likely carry out further enquiries on the issue.
EABL on Thursday said in a notice that it was not aware that its parent firm, Diageo, was planning to exit the company when the brewer issued the five-year bond, which was sold between October 27 and November 10 and listed on the NSE on November 25.
In the statement, EABL indicated that the two transactions were conducted at arm's length between its board and Diageo, which holds a majority 65 percent stake in the brewer.
The company further told the Business Daily that it was important that the board clarified how it conducted the two separate transactions, given their proximity.
"The (share sale) transaction is between Diageo and Asahi as strategic industry-leading shareholders. EABL is not a party to it nor has it been involved in the transaction. EABL's board of directors was first notified of the transaction on the afternoon of December 16, 2025," said the EABL notice.
"The MTN programme was launched by the company and did not involve Diageo. The notes were issued several weeks before EABL or the board received notice of the transaction."
Further, the company said, it is subject to strict disclosure rules and fiduciary duties, which require clear separation between itself and shareholder-level transactions.
The five-year bond—which was the first tranche of a Sh20 billion medium-term note programme—targeted Sh11 billion, but ended up netting Sh16.8 billion at an annual interest rate of 10.8 percent after being oversubscribed by 52.4 percent.
Before issuing the new bond, EABL had made an early redemption of a previously issued Sh11 billion, five-year paper that paid interest of 12.25 percent, which was to mature in October 2026—effectively refinancing the debt at a lower rate.
On Wednesday, Diageo disclosed that it is selling its entire 65 percent stake or 514 million shares in EABL to Asahi for $2.354 billion (Sh303.5 billion), translating to a valuation of Sh590.50 per share.
Asahi, however, cautioned EABL minority investors, who are not giving a buyout offer, against doing a like-for-like comparison or forced equivalence to the Diageo purchase price and the stock market value of EABL's shares.
The Japanese firm, in its regulatory notice, said the purchase of EABL shares, which is being implemented indirectly through the investment vehicle Diageo Kenya, comes with additional commercial arrangements with the British multinational, besides customary contractual protections.
Diageo is also selling a 53.68 percent holding in spirits producer and importer UDV Kenya to Asahi for $646 million (Sh83.29 billion). The deals are set to be completed next year, pending regulatory approvals.
Diageo raised its stake in EABL to the current 65 percent from 50.03 percent in March 2023 for Sh22.7 billion.
The Asahi deal values the extra 14.97 percent stake at Sh69.9 billion, meaning the British firm has earned a threefold return or Sh47.2 billion on the investment in just under three years.
The Asahi deal thus values the extra 14.97 percent stake at Sh69.9 billion, meaning the British firm has earned a threefold return or Sh47.2 billion on its investment in just under three years.
The entire deal for the 65 percent stake will deliver Diageo a premium of Sh149.5 billion above the current Sh154.07 billion market valuation of its EABL shares based on the shares' closing price of Sh299.75.
In its statement, EABL said Diageo had no intention of selling its holding in the brewer when it bought the extra shares.
"At the time of the tender offer, Diageo had no intention of eventually selling its stake in EABL -- EABL-the decision to do so having been made during 2025 and as a result of global developments that have affected Diageo's business," said EABL.
The deepening of its ownership in EABL was broadly interpreted as a vote of confidence in the Nairobi bourse-listed brewer amid a flurry of exits in other African beer markets.
The deal comes in a period when Diageo has exited three African markets in quick succession.
In April, it sold its entire stake in Seychelles Breweries Ltd, an 80.4 percent stake in Ghana Breweries, and last year ceded a 58.02 percent stake in Guinness Nigeria.
This followed exits in Ethiopia and Cameroon in 2022.
The exits were billed as part of a broader strategy of shedding non-core assets as it moved to an "asset-light" model aimed at reducing volatility in Africa and driving better returns.
In recent years, Diageo has been under pressure from its shareholders to cut costs and reduce leverage amid sluggish demand, especially in the beer market.
The company's shares have come under pressure due to wider concerns that the alcoholic beverage industry, which is battling a reduction in drinking, may fall into the structural decline that has afflicted tobacco companies globally.
The biggest contribution to Diageo's net sales in the year to June 2025 came from North America (39 percent), Europe (24 percent) and Asia Pacific (19 percent).
EABL's net profit for the year ended June 2025 grew by 12.2 percent to Sh12.19 billion, with the company paying a total dividend of Sh8 per share in the period. Diageo pocketed Sh4.1 billion in gross dividends from the EABL stake.
