Regional beer giant East African Breweries Ltd is expected to spend at least $18.7 million on the purchase of an extra stake in Serengeti Breweries, signaling the company’s growing faith in future prospects of the Tanzanian market.
EABL has been seeking to plug revenue holes punched by tight regulations and increased taxes in Kenya and Ugandan markets, where the respective governments have been seeking to regulate consumption of alcohol.
The Nairobi Securities Exchange (NSE) listed brewer, whose shares are also traded on the Dar es Salaam Stock Exchange (DSE) and the Uganda Securities Exchange (USE), last week issued a cautionary statement, advising investors that it was in the process of acquiring an additional 30 per cent shareholding in Serengeti Breweries Ltd (SBL) subject to regulatory approvals in the respective countries.
"Shareholders of EABL and the public are advised to exercise caution when dealing in shares of EABL," said the company.
Although the company declined to disclose the value of the deal, The EastAfrican has estimated the value of the proposed transaction to be about Ksh1.87 billion ($18.7 million).
This is based on the firm’s effective ownership interest of 72.5 per cent in SBL, which was priced at a book value of Ksh15.99 billion ($159.9 million) as at June 30, 2019.
In June 2018, EABL increased its effective interest in SBL by conversion of loans receivable amounting to Ksh15.3 billion ($153 million) into equity, representing an additional 21.5 per cent shareholding.
As a result, EABL’s effective interest increased from 51 per cent to 72.5 per cent while the legal shareholding remained at 51 per cent.
The beer maker last year completed the purchase of an additional 4 per cent of the share capital of SBL for $3 million, increasing its shareholding to 55 per cent.
If the latest acquisition proposal is successful, then EABL’s legal shareholding in SBL will rise to 85 per cent, from the current 55 per cent.
Analysts at Standard Investment Bank (SIB) expect the proposed transaction to include the effective economic interest already acquired by the brewer, so that the only additional amount payable is for the acquisition of the 8.5 per cent stake needed to reach the 30 per cent target."We expect the proposed transaction to include the effective economic interest so that only an additional amount would be payable for the 8.5 per cent stake needed to reach the target," SIB said in a note sent to investors.Failure by the SBL minority shareholders to […]
