Minority shareholders of EABL’s Ugandan subsidiary Uganda Breweries Limited (UBL) are set for a windfall of up to 34 times their historical investment in the company when they sell their 1.81 percent equity to EABL through a tender that opened a week ago.
Filings in EABL’s annual report for 2024 show that UBL has a historical book value of Sh687.65 million.
Separately, the report shows the Uganda unit, together with East African Beverages (South Sudan) Limited having net assets of Sh10.2 billion as at June 2024.
EABL, which owns 98.19 percent in the Ugandan brewer, said in a notice last week that it will purchase the remaining stake or 2.18 million shares at a price of USh5,630 (Sh195.42) each. The pricing of the offer values the Ugandan unit at Sh23.51 billion.
The premium takes into account the growth of the asset base of the business over the years, with EABL saying that the valuation also takes into consideration the current and future projected earnings, the market valuation of assets, earnings and growth potential and also the value of intangible assets.
The company said it had contracted the services of an independent valuer to determine the best estimate of the price for the transaction.
UBL is not listed on a securities exchange, and therefore has not had the benefit of a market determined price discovery process.
“As such, the book value of the share capital would not be used to determine the selling price of the shares. To achieve this, an independent valuation of UBL was performed to determine the market value of the business,” said EABL.
“The value of the tender offer is based on the independent valuer’s best estimate of what a willing buyer and willing seller in an open market would agree to transact.
"EABL has done appropriate due diligence to arrive at the optimal price offering to the minority shareholders and is, therefore, offering a fair price for the shares.”
EABL earlier said in its offer notice that the tender offer would be carried out on a willing buyer-willing seller basis, with no element of pressure on shareholders who do not wish to sell.
The tender offer will run until March 3, 2025, and is open to shareholders of UBL who were on the books as of September 2.
UBL is one of four EABL subsidiaries —out of 12 in total— in which the brewer does not have a 100 percent holding.
Others where the holding is partial include Serengeti Breweries Limited in Tanzania (92.5 percent), UDV (Kenya) Limited (46 percent) and East African Beverages (South Sudan) Limited (99 percent).
In pursuing the buyout of the minority stake in UBL through a tender offer, EABL is following in the example of its British parent Diageo which purchased an additional 14.97 percent stake in the company through a similar plan in March last year.
Diageo, which executed the acquisition through its wholly owned subsidiary Diageo Kenya, saw its stake rise from 50.03 percent to 65 percent after buying the additional 118.4 million shares in the brewer at a cost of Sh192 per unit, valuing the deal at Sh22.7 billion.
