Heineken to buy South Africa’s Distell and Namibian Breweries

Dutch brewer Heineken said on Monday, November 15, it planned to take control of South Africa’s Distell Group Holdings and Namibia Breweries Ltd (NBL) to form a southern Africa drinks group worth 4 billion euros ($4.6 billion).

The takeover of Distell would mark a push into wine and spirits for the world’s second largest beer maker, with liquor brand Amarula and wines labels Nederburg and Two Oceans. Heineken will sell Distell’s British-based Scotch whiskies.

Heineken chief executive Dolf van den Brink said the deal would improve logistics and increase points of sale, often shared for beer, wine, and spirits in South Africa, and would do the same in Namibia. It also offered growth in other African markets, such as Kenya and Tanzania, he said.

“It should be seen that we now start to buy spirits and wine companies all over the world,” Van den Brink told Reuters.

Heineken will pay 1.3 billion euros in cash and add its existing South African business, to secure at least 65% of the new business, the remainder largely held by Distell shareholders who decide to reinvest.

The deal will value Distell at about 40.1 billion rand ($2.6 billion) or 180 rand per share, Distell said, a discount of 1.4% to the stock’s close on Friday, November 12.

Heineken and Distell, the world’s largest and second largest cider makers respectively, have gone head-to-head for the cider market in South Africa since Heineken launched its Strongbow brand there in 2016.

Heineken will take control of regional partner NBL, with a current market valuation of about 400 million euros.

Significant synergies

Heineken will buy the 50.01% interest of Ohlthaver & List Group of Companies in NBL Investment Holdings, which holds 59.4% of NBL. Heineken holds the remaining 49.99% of the holding vehicle.

The transaction also entails Heineken’s purchase of NBL’s 25% shareholding in Heineken South Africa, valuing the whole of the latter at 1.5 billion euros.

Van den Brink said the brewer expected cost synergies in production, logistics, and procurement, but no job losses in the near term, along with “significant” revenue synergies.

The overall transaction is expected to increase margins over the medium term and boost earnings per share within the first year after completion.

Distell’s deal talks with Heineken were first announced in May.

Distell shares, which shot up then, were trading down 8% at 167.84 rand, while Heineken’s were up 0.9% at 98.22 euros at 1035 GMT.

The takeovers would be the first major deal for Van den Brink, who took charge at Heineken in June 2020 and has launched a plan to restore profit margins, partly through cutting 8,000 jobs. Heineken did increase its stake to take full control of India largest beer maker United Breweries Ltd in June.

Distell did not pay a dividend for the financial year ended June 30, as a condition for Heineken’s takeover proposal.

Distell CEO Richard Rushton said the deal was likely to close by the end of December 2022 and as part of the agreement, shareholders would not be paid any interim or full-year dividend.

In August, Distell reported a more than threefold rise in its headline earnings per share, the main profit measure in South Africa, as the company recovered from a lengthy coronavirus-related ban on alcohol sales in its home market. – Rappler.com

$1 = 0.8734 euros
$1 = 15.2201 rand