End of an era as Japan firm pays Diageo Sh297b for a sip of EABL

Asahi Group President and Group CEO Atsushi Katsuki and EABL Group MD Jane Karuku after a meeting with EABL staff shortly after the announcement that Asahi Group has bought Diageo PLC's shares in the company. [Courtesy] 

British beverages giant Diageo Plc has agreed to sell its controlling stake in East African Breweries Ltd (EABL) to Japan’s Asahi Group Holdings in a deal worth $2.3 billion (Sh297 billion), marking the end of a decades-long presence for the group in Kenya.

The London-listed owner of brands including Johnnie Walker and Smirnoff will sell its 65 per cent stake in EABL to Japan’s largest brewer and keep a foothold in the market through a licensing agreement with EABL.

The companies announced the deal in a joint statement on Wednesday.

“This transaction both delivers significant value for Diageo shareholders and accelerates our commitment to strengthen our balance sheet, returning the Group to well within our target leverage ratio range…through disposals of non-strategic, non-core assets, alongside delivering positive operating leverage, and tighter capital discipline,” Diageo’s interim chief executive Nik Jhangiani said.

The exit comes as EABL shows resilient performance. For the year ended June 30, the brewer reported a 12 per cent rise in profit after tax to Sh12.2 billion, on net sales of Sh128.8 billion, declaring a total dividend of Sh8.00 per share.

EABL is Kenya's largest drinks company, commanding roughly 80 per cent of the alcohol market.  

It brews local beers like Tusker and Serengeti for Kenya, Uganda, and Tanzania, and distributes Diageo’s spirit brands regionally.

The transaction values the Nairobi-listed EABL at $4.8 billion (Sh621 billion).

Asahi will pay approximately $3 billion (Sh388 billion) in total, acquiring Diageo’s 100 per cent stake in Diageo Kenya for $2.35 billion (Sh304 billion) and a 53.8 per cent stake in UDVK, Diageo’s local distiller, for $646 million (Sh83.5 billion). 

These combined interests constitute the 65 per cent holding in EABL. After tax and deal costs, Diageo will receive $2.3 billion (Sh297 billion).

The Japanese group said it expects EABL to remain listed on the Kenyan, Ugandan and Tanzanian stock exchanges upon completion. 

Asahi president and group chief executive Atsushi Katsuki said EABL is a high-quality, leading company in Kenya, Uganda and Tanzania, with an unrivalled brand portfolio and marketing capabilities, state-of-the-art production facilities and strong market shares.

“Together with its excellent management team and employees, we will pursue sustainable growth and medium- to long-term enhancement of corporate value, while contributing to the development of the local economies.”

In a cautionary announcement on Wednesday, EABL’s board confirmed receipt of Diageo’s notification of the imminent sale. 

The decision by Diageo to call time on its direct ownership of EABL marks the end of an era.

Earlier this year Jhangiani said the company was planning significant divestments to help reduce its debt burden.

The drinks maker has been hit by falling alcohol demand and US President Donald Trump’s trade tariffs.

The move ends decades of corporate dominance by one of the UK’s most prominent investors in post-colonial Kenya and highlights the mounting pressures on traditional British multinationals across the region.

This final round of drinks is the latest and largest in a series of African divestments by Diageo, which has sold its beer businesses in Ethiopia, Cameroon, Nigeria and Ghana since 2022.

At its core, analysts say the exit is a strategic contraction driven by Diageo’s urgent need to strengthen its balance sheet—a financial statement showing a company’s assets, liabilities and shareholder equity.

The company has been grappling with a debt burden that exceeded its own comfort zone.

The deal will reduce Diageo’s net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio by approximately 0.25 times. 

Net debt is a company’s total debt minus its cash and cash equivalents. 

The ratio of net debt to EBITDA is a crucial gauge of financial leverage and health; a lower number indicates less debt relative to earnings. Diageo’s ratio had crept above its target range of 2.5 to 3 times, prompting decisive action, the beer maker said. 

The global drinks maker has also faced a perfect storm of challenges. 

Slowing alcohol demand in key markets, coupled with supply chain disruptions and the lingering impact of past US trade tariffs, have squeezed profitability. 

Selling its directly owned beer production assets in Africa allows Diageo to offload capital-intensive operations and realize a significant cash injection—approximately $2.3 billion after taxes and costs—to pay down debt, analysts said.

Simultaneously, the company will retain a presence in the East African market through a long-term licensing agreement. 

EABL will continue to produce and distribute Diageo’s global brands, such as Guinness, for a fee.

This asset-light model—a strategy focusing on owning high-margin brand intellectual property rather than physical factories—insulates Diageo from currency volatility and operational complexities while preserving revenue.

Diageo’s departure is emblematic of a broader trend. 

For over a century, British companies have been cornerstone investors in Kenya, a legacy of colonial-era ties. 

There are still more than 300 British firms operating in the country. However, most are now navigating their most turbulent operating environment in decades.

“The fortunes of British firms have been dwindling as they struggle to fend off stiff challenges from more aggressive and flexible rivals from China, Europe, and within Africa itself,” said Ian Njoroge, a Nairobi-based independent corporate strategist. “The model of the large, centralised British multinational is being tested as never before.”

Some of the oldest British investors are in the crosshairs. Barclays Bank drastically reduced its African stake. Standard Chartered Bank has restructured its Kenyan operations. British American Tobacco contends with stringent regulations, while Unilever has spun off several African businesses.

“Diageo’s exit is arguably the most significant because EABL was such a visible crown jewel,” added Njoroge. “It signals a maturation of the Kenyan market where historical ties are less important than competitive agility and sharp capital allocation.”

In contrast, the acquisition is a bold growth play by Japan’s Asahi, which views East Africa’s young, expanding population as a long-term engine. 

“This gives us a leading platform in Kenya and the east African market, which is expected to deliver long-term growth driven by population increase and economic expansion,” Asahi said in a statement. 

The company highlighted EABL’s “rich brand portfolio,” which includes iconic local beers like Tusker—a favourite tipple among many Kenyan beer lovers—Senator keg, and Chrome.

Asahi said it expects EABL to remain listed on regional exchanges and will seek an exemption from making a mandatory takeover offer—a required bid for all remaining public shares—for the 35 per cent it does not own.

The Japanese firm offers a diverse collection of brands centered on beer, alcohol and non-alcohol beverages, and food.

Some of its previous landmark acquisitions include Carlton and United Breweries in Australia, SABMiller's Central and Eastern Europe operations, and SABMiller's European premium brands Peroni, Grolsch, and Meantime.

For EABL, the shift from Diageo to Asahi opens a new chapter.

“This acquisition marks a significant step in accelerating our growth ambition of becoming the most celebrated beverage business in Africa. The new majority owner brings significant knowledge and expertise in innovation and growing successful brands globally that will help us achieve that ambition,” said EABL managing director Jane Karuku.

The brewer has proven resilient, and its future will now be fueled by Japanese capital and global brewing scale, analysts said.

Following a cautionary announcement, the Nairobi Securities Exchange halted trading in EABL’s shares on Wednesday. Trading is set to resume Thursday.