South Africa: Distell Group Holdings reports “satisfactory progress” in negotiations of its potential acquisition by Heineken

Distell Group Holdings said on September 29 that “satisfactory progress” had been made regarding its potential transaction following a bid by Heineken, Europe’s biggest and the world’s second biggest brewer, to acquire full control of the South African liquor group, IOL News reported.

However, Distell, with brands such as Amarula, Savanna, Hunter’s Dry, Durbanville Hills and Nederburg, warned in a trading update on September 29 that there was no certainty at this stage that a deal would be concluded, and discussions about certain issues still needed to be agreed.

“The parties are committed to finalising these outstanding issues in the shortest possible time frame and Distell will inform shareholders immediately upon their finalisation,” the group said

Heineken first expressed its interest to acquire Distell on May 18, saying at the time this would be its biggest deal in a long time. Distell’s market capitalisation at the September 29 share price was R40.97 billion.

Discussions ensued and Distell told shareholders it believed it would be able to provide more detailed information on the potential transaction before the end of the third quarter – the quarter ends today.

Distell also withheld a dividend declaration for the year ended June 30, as this would be one of the conditions for a potential deal. If discussions were terminated, Distell intended to declare the dividend. Distell’s share price rose 1.39 percent to R186.23 in the afternoon on September 29, which represented an increase of 57.98 percent over six months and a 148.2 percent increase over a year.

On June 23, Heineken acquired additional shares in United Breweries Limited (UBL) in India, taking its shareholding to 61.5 percent from 46.5 percent. On July 29, Heineken obtained control of UBL, and UBL became a Heineken operating company.

Analysts have previously speculated that Distell would be able to provide route-to-market and new market opportunities in other African countries for the Netherlands-based Heineken, where Heineken does not yet have a presence.

Some of Distell’s premium spirits brands could also be of appeal in Heineken’s other international markets.

In the year to June 30, Distell increased revenue by 24.2 percent to R19.95bn, despite the lockdown challenges of the Covid-19 pandemic, and revenue was also 4.6 percent higher than the comparable period in 2019.

Headline earnings per share were up 18 percent to R1.69bn.

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