British multinational Diageo is set to bank a profit of Sh47.2 billion from selling the extra stake of 14.97 percent it bought in East African Breweries Limited (EABL) in March 2023 after reaching a deal to offload its Kenyan assets to Japanese beverage maker Asahi Holdings.
Diageo, the world’s largest spirits group, has agreed to sell its 65 percent stake in East African Breweries to Japan’s Asahi Holdings for $2.354 billion (Sh303.5 billion), valuing the shares at Sh590.51 each as the multinational divests from its last direct African beer holding.
London-listed Diageo, maker of Johnnie Walker whisky and Captain Morgan rum, is grappling with tariff hikes in its key U.S market, high debt levels and indications that some younger consumers could be shifting away from drinking alcohol.
The giant brewer has pledged to sell down non-core assets as part of a plan to reduce debts and cut costs, terming the sale of EABL as consistent with the strategy.
But its recent purchase of the extra 14.97 percent stake in EABL from local shareholders, which then appeared as an outsized premium, has emerged as a masterstroke.
In the March 2023 transaction, Diageo raised its ownership in EABL from 50.03 percent to 65 percent after buying extra shares worth Sh22.7 billion, offering local shareholders a premium of 39 percent or Sh6.4 billion.
It’s now Diageo’s turn to reap a premium from the sale of the extra stake to Japan’s Asahi Holdings
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 entire deal for the 65 percent stake will deliver Diageo a premium of Sh174 billion above the EABL market valuation at the Nairobi bourse, which stood at Sh129.5 billion at the latest share price of Sh252.
“This transaction delivers both significant value for Diageo shareholders and accelerates our commitment to strengthen our balance sheet,” said Diageo Plc interim chief executive officer Nik Jhangiani.
In addition to exiting EABL, Diageo is also offloading a 53.68 percent holding in spirits producer and importer UDV Kenya, which is associated with brands like Smirnoff, Kenya Cane, Kenya Gold, V&A and Bond.
Asahi will buy the stake for $646 million (Sh83.29 billion), taking Diageo’s pay from the deal to Sh386.8 billion.
This makes the transaction the largest ever recorded in Kenya’s capital market, eclipsing the €2.4 billion (Sh360 billion at today’s rate) that Vodacom paid to acquire a 35 percent stake in Safaricom from its British parent Vodafone in 2017.
It also marks the largest investment in an African alcohol business by a Japanese brewer and values EABL at Sh467 billion.
Japan’s Asahi has been hunting for opportunities in markets including Africa and South America as it looks to expand globally.
Its president and CEO Atsushi Katsuki said EABL offers an unrivalled portfolio of brands, marketing capabilities and production facilities.
The deal is set to be completed in the second half of 2026. Asahi expects EABL to remain listed on the Kenya, Uganda and Tanzania stock exchanges after completion of the transaction.
Under the deal, EABL will retain Tusker and other local brands and sign new agreements with Diageo to produce Guinness and some spirits, while importing and distributing others.
The multinational will also renew agreements with EABL to produce certain Diageo spirits such as Smirnoff and Captain Morgan, and ready-to-drink brands such as Smirnoff Ice and Origin on licence terms.
Asahi Holdings is also expected to introduce some of its best-known brands, including Asahi Super Dry, Peroni Nastro Azzurro and Pilsner Urquell into the Kenyan and East African market after completing the deal.
The company, which is listed on the Tokyo Stock Exchange, produces a diverse range of beer, alcohol and non-alcoholic beverages, and food brands. The company maintains a presence in Japan & East Asia, Europe, Asia Pacific, with annual revenue of $19 billion (Sh2.45 trillion).
SIB senior research associate Wesley Manambo told the Business Daily yesterday that the higher valuation of EABL by Asahi relative to the prevailing share price at the NSE is indicative of inefficiency in the local capital market in the pricing of local companies.
“The valuation has come higher than preliminary estimates, which we see as an indicator of the businesses’ revenue-generating capability and a plus for the risk-on investors who were counting on a near-term exit by Diageo,” said Mr Manambo.
“We believe Asahi’s strategy of focusing on growing its core business of beer brands will be central to EABL as a going concern. Investors should also take comfort in the East Africa market’s ability to grow the business in light of economic and demographic growth.”
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.
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.
In recent years, Diageo has come 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 came from North America (39 percent), Europe (24 percent), and Asia Pacific (19 percent). Latin America also made a small contribution at nine percent.
