World’s leading premium drinks company, Diageo has postponed the purchase of Serengeti Breweries Limited (SBL), the East African subsidiary of East African Breweries Limited (EABL), till 2018 to allow shareholders’ investment reach maturity.
The UK brewing giant, which holds a 50.02 percent stake in EABL, had in 2010 expressed its commitment to buying a 49 percent stake in SBL between February and July of this year, but said the $600 million (Sh51.6 billion) deal, would be based on the performance of the Tanzania unit.
“The option for Diageo to acquire the remaining stake in Serengeti Breweries Limited has been extended to 2018 by mutual agreement between Diageo and SBL’s other principal shareholders.
“EABL has invested considerably in bolstering its brands, securing distribution and establishing a solid platform from which to grow its beer and spirits business in this attractive market. As this continues to be an investment period, it was appropriate that the option be extended,” Diageo told Business Daily in an email response.
Diageo will be hoping that the heavy investments being made by the shareholders of SBL, including EABL, which owns a 51 per cent stake in the firm, would have matured in four years. The buying of SBL would however not be automatic, according to Diageo as it would strictly consider the firm’s maturity.
The company’s determination to exploit rising incomes in Africa’s emerging markets and also get a larger market share in the region remains unflinching, and has been rewarded with improved sales as net sales grew 10% from strong performance of spirits and a robust performance of beer in the continent.
The company added on its website that Africa represents its largest group of emerging markets in terms of net sales and employs over 5,300 people, meaning one in four of Diageo’s global workforce is employed within the continent.
EABL expected the deal to happen this year after noting that Serengeti sales remained flat at Sh7.1 billion ($82.3m) in the year to June. Diageo however revealed that SBL posted an operating loss of Sh280 million ($3.2m) in the same period.
Had Diageo bought SBL this year, its 49 percent stake could have given it a 74.5 per cent interest in SBL, given that it owns half of EABL.
