Investors have sold Sh285.8 million worth of East African Breweries Plc (EABL) shares in profit-taking trades since Diageo Plc made an offer to raise its stake in the Nairobi Securities Exchange-listed firm at a price of Sh192 per share.
The multinational announced on October 14 that it will buy an additional 118.3 million shares in EABL through a tender offer.
The move has lifted the brewer’s share price and created an opportunity for some investors to sell their holdings at a profit ahead of Diageo’s purchases which will occur over 40 days starting January 30, 2023.
EABL’s share price gained 23.1 percent on the day of the material announcement compared to the previous closing of Sh138. It has declined slightly to the Friday price of Sh167.25. The share price has traded below Sh150 on most days since the start of the year, underlining the premium of Diageo’s offer and its impact on lifting the stock since the announcement.
Market data shows that investors have sold a total of 1.68 million EABL shares since October 14, cashing out Sh285.8 million collectively.
The bulk of the sales, Sh209.9 million, were recorded in the first three days of the announcement. More shares are expected to be sold to Diageo whose offer is still substantially higher than the prevailing market price.
Some 40.7 million shares of EABL had been bought between the start of the year and the eve of Diageo’s announcement at a cost of Sh5.8 billion, representing an average price of Sh144 per share. The London-listed firm could spend up to Sh22.7 billion in the tender offer, aiming to raise its stake in EABL to 65 percent from the current 50.03 percent.
Diageo’s offer comes at a time when the subsidiary has recorded higher profitability, aided by a sharp recovery in demand following the removal of restrictions related to the Covid-19 pandemic.
EABL more than doubled its net earnings to Sh15.57 billion in the year ended June from Sh6.96 billion a year earlier.
“Diageo’s East African business continues to go from strength to strength and is expanding its reach at pace,” Diageo said when announcing the tender offer.
“In addition, a resilient and adaptive approach by the business through the Covid-19 pandemic combined with vibrant e-commerce growth has cemented Diageo’s belief that this is an appropriate time to deepen its East African position.”