DAVID MAGERIA, Nairobi | Wednesday
LEADING regional brewer East African Breweries, which faces strong competition from South African Breweries in regional markets but remains dominant in Kenya, has announced plans to expand, rationalise and diversify its business.
Top EABL officials said the company intends to acquire 100% of its two subsidiaries in Uganda and Tanzania and list them on the two countries’ fledgling stock markets.
EABL owns 64% of Uganda Breweries Limited (UBL). Its main shareholder, the Diageo Group, owns another 30% through its subsidiary Guinness and the balance is held by minorities.
In Tanzania’s Kibo Breweries, it owns 86% and is seeking to buy out its partner’s 14%.
Company officials told reporters in Nairobi EABL had offered all UBL minority shareholders four EABL shares and 79 Kenya shillings for every 25 shares.
Diageo, which holds 46.7% of EABL, is expected to raise that shareholding to over 50% if the UBL deal goes through and it is allotted new shares under a proposed scrip dividend option, officials said.
Faced with a shrinking beer market in its key Kenyan market, which the company blames on high taxation and poor economic growth, officials said EABL intends to move into the lucrative spirits business.
The plan is to acquire shares in companies that deal in spirits both in Uganda and Kenya. If this comes off, the company will produce Smirnoff Vodka and Bond Whisky and also market some of the world’s leading brands like Johnnie Walker Whiskey, officials said.
EABL is the fourth largest capitalised firm on the Nairobi bourse and has been virtually the only share attracting strong interest from foreign investors looking at the Diageo partnership.
Its earnings per share rose to 12.91 shillings in the financial year ended June, from 11.49 shillings in 1999. Brokers said its latest plans were crucial in rekindling investors’ interest.
”The beer market has been flat meaning a company like EABL has to grow by acquisition,” said John Munge a director of leading brokers Shah, Munge & Partners. – Reuters