Advertisement

EABL settles Serengeti merger row

Tuesday August 01 2017
serengeti

Serengeti Breweries’ plant in Moshi Tanzania. In July 2015, Tanzania’s Fair Competition Commission threatened to revoke EABL’s 51 per cent stake in Serengeti Breweries Ltd. PHOTO FILE | NATION

By Allan Olingo

Regional brewer East African Breweries Ltd (EABL) said that it will convert a loan to its Tanzanian business into equity, after reaching a settlement with the Competition Authority that had been investigating the transaction.

“Early last month, we managed to close that matter, which will now allow us to complete this capital restructuring, convert our loan to the company into equity, and restore our equity position and profitability,” finance director Gyorgy Geiszl said.

In July 2015, Tanzania’s Fair Competition Commission (FCC) threatened to revoke EABL’s 51 per cent stake in Serengeti Breweries Ltd (SBL), accusing the regional brewer of breaching merger agreement rules, and not ensuring improved performance at Serengeti.

It also accused EABL of failing to turn around Serengeti’s fortunes as agreed upon prior to the purchase agreement.

“While monitoring EABL’s compliance with the merger approval conditions, we observed that, based on the rationale of the approval, the performance of SBL was not as per the expectations of the commission,” FCC director-general Fredrick Ringo then said.

READ: EABL executives meet Tanzania watchdog over Serengeti buyout

Advertisement

In October 2015, EABL chose the settlement route in a bid to avoid litigation. The negotiations, however, have been drawn out, stretching 20 months past the October deadline FCC had then issued.

“These are privileged negotiations whose details cannot be made public. However, I can confirm that indeed, an agreement was and we will be looking at its implementation,” the director of mergers, research and advocacy at FCC Dr Allan Mlulla said.

Diageo which owns 50.02 per cent of EABL, acquired a 51 per cent stake in July 2010, and agreed to buy the remaining 49 per cent stake in SBL by July 2014 for $600 million.

EABL previously had a reciprocal production and marketing deal with SABMiller’s TBL, which saw the latter sell EABL’s brands in Tanzania.

For the merger to go through, EABL had to terminate the agreement — it sold its 20 per cent stake in TBL for $71.4 million. But Diageo delayed the purchase of SBL for a further four years.

READ: EABL, Tanzania subsidiary merger could be repealed

Advertisement