Tanzania's competition regulator has accused EABL of breaching merger agreement rules while at the same time not ensuring the improved performance of SBL.
Kenya’s largest brewer, the East African Breweries Limited (EABL), is on the verge of losing its Tanzania subsidiary, Serengeti Breweries Limited(SBL), after Tanzania’s Fair Competition Commission (FCC) issued a notice of intention to revoke the merger between the two companies.
In an advertisement published in Tanzania's dailies, the FCC accuses EABL of breaching merger agreement rules while at the same time not ensuring the improved performance of SBL.
Dr Fredrick Ringo, the FCC director-general, said their investigations showed that EABL was breaching the rules provided for under the FCC 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 expectations of the Commission,” Dr Ringo said.
The FCC has invited for submissions to both companies, and any other interested parties who feel that the intended revocation would affect their interests in the merger.
The EABL and SBL merger was approved in July 2010 and saw the Kenya-based brewer acquire a controlling stake (51 per cent) in SBL. FCC said that according to the merger agreement, EABL committed to ensuring that SBL achieved growth more than what it was achieving.
Last year, Diageo delayed the purchase of SBL for a further four years citing the Tanzanian brewer's slow growth.
Diageo, which owns a 50.02 per cent stake in EABL, had committed in 2010 to buy a 49 per cent stake in SBL by July 2014 for $600 million based on the performance of the Tanzanian unit.
SBL posted an operating loss of $2.7 million in the 2013/14 financial year.