Kenya, Tanzania, & Uganda: Investors fail to sell 25.12 mln East African Breweries shares to Diageo

Investors failed to sell 25.12 million East African Breweries Plc (EABL) shares to the parent company Diageo Plc, denying them a chance to book a Sh552.6 million gain on the back of oversubscription in the tender offer, the Business Daily reported on March 27.

Diageo had sought to buy 118.39 million EABL shares but received offers to purchase 143.52 million shares, forcing it to turn away some of the investors motivated by the premium offered.

The British multinational offered to buy the share at Sh192 apiece, representing a premium of 39 percent on EABL’s share price of Sh138 on the last day of trading before Diageo disclosed its offer on October 14, 2022.

The 25.12 million shares that Diageo has not bought despite receiving the applications would have cost it Sh4.82 billion as opposed to the current value of Sh4.27 billion, going by the March 23 closing price of Sh170 a piece.

The difference between the offer price and the current share price means the investors who had bid to sell their 25.12 million shares have missed out on a chance to make a Sh552.6 million gain at a time many of the Nairobi bourse stocks are battered.

Investors were also motivated by Diageo’s offer that allowed those selling their shares to remain eligible for EABL’s interim dividend of Sh3.75 per share for the half year ended December, so long as they were on the brewer’s books by the register closure date of February 16.

The first phase ran from February 6 to March 17 while the second one started on February 27 and closed on March 17, with both phases posting oversubscriptions.

Diageo had said it was going to give priority to EABL shareholders who were on the brewer’s books by January 16 and made early bids in its move to purchase an additional 14.97 percent stake in the local subsidiary.

Diageo says it has already effected the transfer of the acquired ordinary shares to Diageo Kenya, the local holding company.

“The transfer of the ordinary shares to Diageo Kenya has been effected as a market transaction on the NSE and Diageo Kenya has commenced payments for each accepting shareholder's final entitlement in accordance with the preferred method,” said the firm.

Diageo Kenya will now hold 514 million ordinary shares representing 65 percent of the issued ordinary shares of EABL. Prior to the deal, it held 395.6 million ordinary shares amounting to a 50.03 percent stake.

The move by the company to prioritise early bidders was seen as a way to encourage the uptake of the offer and reward existing shareholders with a significant capital gain on their stock.

Diageo’s enhanced stake in EABL is a signal of its confidence in the brewer’s future prospects. The subsidiary’s profitability has rebounded on the reopening of the regional economies following the easing of the Covid-19 pandemic.

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