EABL's share price surges on Diageo offer to buy more stake

An employee at Keroche Breweries inspects beer production after they resumed operations after their tax row with KRA was resolved. [Antony Gitonga, Standard]

UK's Diageo has offered to buy additional shares in East African Breweries Ltd (EABL) from other shareholders and increase its majority shareholding to 65 per cent.

The company said it had offered to buy 118.39 million shares through Diageo Kenya from other shareholders of EABL at a premium price of Sh192 per share, or Sh22.7 billion for the 118.39 million shares.

The offer price is 39 per cent higher than the Sh138 that the share traded at on Thursday at the Nairobi Securities Exchange (NSE).

The share price, however, surged 23 per cent on Friday to Sh170.

Diageo Kenya currently has a 50.3 per cent stake in EABL and conclusion of the deal is expected to push this up to 65 per cent.

The offer will close on March 10, 2023.

"We, Diageo Kenya, hereby announce to the public that we have on October 13, 2022 served on EABL notice of our intention to acquire up to 118,394,897 additional ordinary shares in EABL by means of a tender offer made to all other shareholders of EABL," said Diageo Kenya in a public statement yesterday.

The company added that this represented "no more than 14.97 per cent of the issued share capital of EABL, through the tender offer."

"The price payable for each ordinary share in the proposed tender offer is Sh192," said Diageo in the statement.

"If the tender offer is accepted in full, Diageo Kenya will hold 514,003,331 ordinary shares in EABL, which would represent 65 per cent of the issued share capital of EABL."

The company's net profits in the year to June 2022 .

The brewer was boosted by the reopening of entertainment joints following the easing of Covid-19 containment measures.

Diageo said it planned to retain EABL's listing at the NSE, noting that this was in the interests of both the company's shareholders as well as that of the Kenyan public.

"Diageo Kenya intends to maintain EABL's listing on the Nairobi Securities Exchange following the completion of the tender offer, as it believes that interests of EABL's shareholders and the broader public would be best served by EABL remaining a company listed on the NSE and available to be invested in by the Kenyan public."

"Diageo's indirect shareholding in EABL of 50.03 per cent is lower than the average shareholding of approximately 66.9 per cent held by multinational parent companies listed subsidiaries in Kenya."

Diageo's indirect shareholding in other subsidiaries in Africa include Guinness Nigeria (58.02 per cent) and Guinness Ghana Breweries (80.04 per cent).

The company said the offer that would significantly increase its stake in EABL was out of long term confidence in EABL and the local economy.

There has been growth in consumption of beers and spirits across the region, with the industry showing resilience even after the outbreak of the Covid-19 pandemic.

"This transaction will enhance our exposure to the East African growth opportunity. It is a demonstration of our long-term confidence in EABL and in the East African alcoholic and non-alcoholic beverage market and economy, generally," said Diageo.

"The EABL business has performed well, delivering strong returns in a group of markets with positive demographic and consumer trends."