East African Breweries Limited #ticker:EABL has completed acquisition of additional 30 percent stake in Tanzanian subsidiary for $55 million (Sh5.98 billion), raising its ownership to 85 percent.
EABL, majority-owned by UK’s Diageo, had disclosed plan to increase its stake in Serengeti Breweries in March 2020 after identifying the Tanzanian market as promising for growth of beer and spirits business.
“We got one minority shares. We decided to buy them out and they also wanted to sell. The shareholding changed from 55 to 85 percent,” EABL managing director Jane Karuku said without giving further details.
British drinks group Diageo disclosed EABL acquired the 30 percent stake late last year for $55 million (Sh5.98 billion) in cash and £16 million (Sh2.1 billion) in outstanding loans that EABL had earlier extended to the Tanzanian brewer.
“On 21 October 2020 and on 6 November 2020, EABL completed the acquisition of 13.3% and 16.7%, respectively of shares in Serengeti Breweries Limited for a total consideration of $55 million (£42 million) in cash and £16 million in the form of shareholder loans outstanding to EABL,”Diageo wrote in a note to investors.
Ms Karuku said the Serengeti business sustained “strong growth through investment behind the brands and capacity expansion” for beer and local spirits production in the year through June 2021.
Revenue in the subsidiary increased 15 percent year-on-year, with beer (10 percent) and spirits sales growing by double-digit.
The Serengeti was a major beneficiary of the giant brewer’s Sh7.8 billion capital investment in the year ended June 2021, largely targeted at the Moshi plant which EABL has identified as a major player in its growth strategy for the spirits business.
The deal for the additional stake in the Tanzanian unit followed another acquisition of four percent in July 2019 for $3 million (about Sh326.1 million under prevailing exchange rate), raising the brewer’s stake to 55 percent.
EABL’s bid to grow its stake in Serengeti through acquisition of minority shareholders has in the past courted controversy, with Tanzanian government aggressively protecting minority interest.
Last year’s transaction raised its legal and economic ownership in the subsidiary to 55 percent and 74.5 percent respectively.
Before the July 2019 deal, EABL owned a 51 percent stake in Tanzanian brewer, but had a larger claim in terms of assets and earnings at 72.5 percent.
This was a result of conversation of Sh15.3 billion loans receivable from Serengeti into equity in the year ended June 2018.