Minority investors are set to inject an additional Sh3.2 billion capital into Serengeti Breweries, a subsidiary of East African Breweries (EABL) #ticker:EABL, as part of a deal with the Kenyan brewer.
The Nairobi Securities Exchange-listed firm in June 2018 converted the Sh15.3 billion loan it had provided to Serengeti into equity to ease the Tanzanian company’s debt burden.
This saw its stake in the subsidiary rise from the previous 51 per cent to 72.5 per cent. EABL says in its latest annual report that its interest in Serengeti will revert to the original 51 per cent in the future once Serengeti raises Sh3.2 billion from the minority investors.
“Under the terms of the arrangement, the non-controlling shareholders of Serengeti would pay the company Sh3.2 billion from 50 per cent of their dividends received from Serengeti,” EABL says in the report.
“Upon repayment of the liability through dividends, the effective economic interest of EABL in Serengeti would revert to the original 51 per cent status.”
The minority shareholders made an initial payment of Sh16 million or 0.5 per cent of the amount owed to Serengeti in the year ended June. This is the first time EABL is providing details of its transactions with minority shareholders of Serengeti.
Having announced the debt conversion, the company subsequently said Serengeti would remain unchanged without indicating circumstances that would hold down its ownership.
Of the Sh15.3 billion loan that EABL converted into equity in Serengeti, it has written off Sh4.2 billion.
The debt-to-equity deal was made to ease the subsidiary’s debt burden. Tanzanian authorities previously opposed EABL’s acquisition of Serengeti and forced it to pay an unspecified fine to settle alleged flouting of takeover rules.