Dar es Salaam — East African Breweries Limited (EABL) has raised its stake in Tanzania’s Serengeti Breweries (SBL) by 21.5 per cent after converting a loan into an equity.
The Kenya-based brewer previously held a 51 per cent stake in SBL, but the new arrangement means that EABL now owns 72.5 per cent of SBL. This came after EABL announced the conversion of a Ksh15.3 billion (nearly Sh350 billion) debt with SBL into 21.5 per cent equity. Kenya’s Business Daily reported on Tuesday that the deal had already been approved by Tanzanian regulators.
SBL, which has the second biggest share of Tanzania’s beer market at 15 per cent, has not explained why it failed to pay the debt.
Reached for comment yesterday, SBL corporate relations director John Wanyancha asked this reporter to visit the company’s website for more information.
"I cannot comment anything at this juncture. If you want more information on the matter, get hold of the latest EABL financial report," he said. According to the Business Daily report, EABL made the transaction to ease its subsidiary’s debt burden.
However, SBL’s minority shareholders, who were diluted in the deal, could restore their original 49 per cent stake in the future by ceding half of their dividend entitlement going forward.
"On July 1, 2017, the company entered into an agreement with the non-controlling shareholders of its subsidiary, Serengeti Breweries Limited (SBL), to convert all its outstanding loans receivable to the subsidiary into equity shares, without proportionate capital contribution by the non-controlling shareholders," EABL says in its latest annual report.
"The transaction resulted in an increase in the effective control of the subsidiary from 51 per cent to 72.5 per cent."
The transaction came after the brewer reached a settlement with Tanzanian authorities over its acquisition of SBL in 2010 for Ksh4.9 billion.
However, EABL did not disclose whether or not SBL is profitable.
Serengeti Breweries was founded in 1996 and in 2010, some shares were sold to global beverage producer Diageo where further investment was done with the opening of Mwanza and Moshi plants.In its audited financial results released last week, EABL posted a net profit of Ksh7.25 billion ($72.5 million) for the 12-month period to June 30, 2018, compared with Ksh8.51 billion ($85.1 million) the previous year.The company spent Ksh5.93 billion ($59.3 million) to pay out dividends to its shareholders, even as it posted reduced profits for the year ending June 30.