Shareholders at East Africa Breweries Limited (EABL) are rushing to sell stakes to British multinational Diageo, tendering 122 million shares against 118 million needed in the first round.
The international brewer, through its wholly-owned indirect subsidiary, Diageo Kenya, wants to push its stake in EABL from its current 50.03 per cent to a maximum of 65 per cent.
The British firm plans to purchase an additional 14.97 per cent stake in the local subsidiary.
The deal will benefit EABL shareholders who were on the brewer’s books by January 16.
Announcing the results of the first closing of the tender offer, Diageo Kenya said shareholders took advantage of the premium price offered to get value for their money.
"The total number of ordinary shares tendered by early acceptance shareholders was oversubscribed by 3.4 per cent. We have designated 47.5 million shares for a guaranteed allocation of up to 10,000 shares for all offers it receives, with preference given to early bidders,'' Diageo said in a statement.
The move by the firm to prioritise early bidders is meant to encourage uptake of the offer, and also reward existing shareholders who now stand a chance to make a significant capital gain on their stock.
They are selling their shares to the multinational at the Nairobi Securities Exchange (NSE) at a price of Sh192 per unit. This is Sh17 more compared to the current price that is ranging between Sh174 and 175.
Those selling their shares are eligible for EABL’s interim dividend of Sh3.75 per share for the half year ended December.
In the second phase, which runs between February 27 and March 17, an additional 55 million shares will be used to satisfy bidders who missed out on their full allocation in the first phase, with the balance used cover the remaining bids.
The results of this bid will be announced on April 5.
Diageo indirectly holds a 50.03 percent stake in EABL—representing 395.6 million shares.
The purchase of additional shares, according to Diageo, is largely driven by the brewer’s improved returns to investors and growing market share in the country.
The brewer doubled its net earnings to Sh15.57 billion for the year ended June 2022 from Sh6.96 billion a year earlier.Its return on equity —a ratio that gauges how efficiently a company generates profits— jumped to 58.9 percent from 46.9 percent.
Its share price has gained almost 30 units since Diageo announced plans to buy more stake.
The British firm has been on a drive to get majority stake in listed African subsidiaries. It has 80 per cent stake in Guinness Nigeria and 58 per cent in Guinness Ghana Breweries.
Two year ago,the firm also acquired an additional 30 percent stake in EABL's Tanzania subsidiary, Serengeti Breweries Limited for Sh5.98 billion, raising its ownership to 85 per cent.
This followed an earlier acquisition of four percent in July 2019 for $3 million (Sh381 billion), which had raised its stake in Serengeti to 55 per cent.
