Kenya: East Africa Breweries Limited top management under scrutiny for sale of additional shares to Diageo

The East Africa Breweries Limited (EABL) top management has been placed under scrutiny by the Senate over the acquisition of an additional 15% shares in the giant brewer by its majority shareholder- UK-based Diageo Plc, the Kenyan Wallstreet reported on September 12.

While appearing before the Senate Standing Committee on Trade, Industrialization, and Tourism, EABL Group Managing Director Jane Karuku said that Diageo Kenya acquired an additional 15% shareholding in the brewer in 2023, by way of a Public Tender Offer to all EABL shareholders, a transaction which received a nod from the Capital Markets Authority(CMA) and other relevant regulators.

The Senate Committee Chaired by Kajiado Senator Lenku Ole Kanar Seki had requested the Managing Director to apprise the Committee on the strategic business impact and benefits of the acquisition of an additional 15 percent shares in the listed brewer by Diageo Plc.

A petition before the Committee also sought to know whether the acquisition of shares by Diageo PLC is a consolidation for the alleged transfer to and eventual takeover by Heineken or Castemil group; why the brewer was undertaking considerable downsizing despite the consistent posting of marginal profits; and the justification of its policy of disposing off huge company assets and how local shareholders have benefited from such sales.

Ms Karuku told the Senate Committee that the brewer had not engaged in downsizing initiatives in the past decade. She emphasized that EABL is on a substantial growth trajectory, a trend reflected in the augmentation of the company’s total assets value from KSh 14 Billion in 2000 to KSh 110 Billion in 2022 further translating to EABL’s high contribution to Government Revenue and shareholders returns in terms of profits and dividends.

A glimpse through its 2023 Annual Report, reveals that Diageo, through its local subsidiary Diageo Kenya Limited, increased its aggregate equity stake in the giant brewer from 50.03% during the year to a maximum of 65%.

Diageo first acquired majority control of EABL in 2000.

Available data on the EABL website shows that Diageo Kenya Limited is the firm’s largest shareholder with 514,003,331 shares or 65% while the rest of the brewer is owned by nominee shareholders.

Figures further show that 42 individuals with over a million shares each own 82.98% of EABL or a total of 656,155,565 shares.

In her final response on the justification for the policy of disposing off huge company assets and how local shareholders have benefited from these sales, Karuku told the Committee that EABL has not sold any strategic, critical, or performing business assets as alleged by the Petitioner.

12 September, 2023