Zimbabwe: Zimbabwe gives green light to AB InBev’s takeover of SABMiller

Zimbabwe has given the green light to SABMiller’s merger deal with AB InBev, but has set conditions such as maintaining farmers’ contracts and maintenance of production of local brands.
SABMiller controls Zimbabwean listed biggest brewer and manufacturer of soft drinks, Delta Corporation, Creamer Media’s Engineering News reported on July 5.

Delta Corporation also owns a significant interest in Afdis, in which Distell also has shares. Afdis manufactures wines, spirits and ciders and is a value proposition for Delta as consumers switch to cheaper alternatives such as spirits.

“I wish to advise that the examination of the … merger has been finalised and the Commission approved the transaction … with conditions,” said Zimbabwe’s Competition and Tariff Commission acting director, Ellen Ruparanganda, in a letter to Delta Corporation and AB InBev dated July 1.

“Approval of the proposed transaction is subject to certain conditions concerning the business operations of Delta,” said Ruparanganda.

The letter cautioned against possible retrenchments at the Zimbabwean listed brewer as one of the conditions for approval of the merger deal.

It also listed that Delta be able to maintain its contract farming arrangements in Zimbabwe for the production and supply of sorghum and malt. New owners AB InBev also have to make sure that Delta grows production of some local beer brands such as Zambezi Lager and Bohlingers.

The conditions set by Zimbabwe also compel “Delta to seek to introduce new beer brands that can use locally produced raw materials to produce products for both the domestic and export markets” and to “work closely with Government agencies to help reduce the harmful use of alcohol”.

The new owners would also be required to help “develop Delta capabilities in order to increase the level of exports” although the company was suffering from imported beer and soft drinks products.

This had forced Delta to cut its prices in a bid to compete well against the low priced imported products. Delta is also facing a stagnating Zimbabwean economy that has tipped into deflation.

Despite the challenges companies are facing in Zimbabwe, Delta is investing in expanded capacity for its products through new lines and new manufacturing plants. It is also one of the stocks that foreign investors are still interested in on the Zimbabwe Stock Exchange.

06 July, 2016