Competition Commission gives green light to Heineken’s buyout of Distell
The deal is not yet done as the Competition Tribunal still has to approve it, but Heineken has jumped through hoops to make it happen.
The Heineken Group is one step closer to taking control of leading South African alcoholic beverages producer, Distell, and Namibia Breweries, the producer of Windhoek Lager.
The Competition Commission has recommended that the Tribunal approve Heineken’s purchase of a controlling interest in Namibian Breweries Investment Holdings Limited (NIH) and Distell Group’s flavoured alcoholic beverages (FABs), wine, and spirits operations through Sunside Acquisitions Proprietary Limited (Newco) — a special-purpose vehicle controlled by Heineken.
The proposed transaction translates into an internal restructuring of Distell to create Newco and CapeVin.
The recommended deal means Distell’s FABS, spirits and wine portfolio, including the popular Savanna and Hunter’s ranges of cider, would be incorporated under Newco, while Distell’s whisky and gin operations would fall under Capevin Holdings Proprietary Limited (CapeVin), a subsidiary of Distell held by current shareholders of Distell and Heineken.
Distell brands include Amarula, 4th Street, Nederburg, Ship sherry and Klipdrift brandy.
Out-of-scope assets Black Bottle, Bunnahabhain, Burn McKenzie, Deanston, Gordons Gin, Scottish Leader and Tobermory Gin will fall under CapeVin, which is majority owned by Distell’s majority shareholder Remgro.
To clinch approval, Heineken had also offered to dispose of its Strongbow cider brand in SA and other SA Customs Union countries to allay Competition Commission objections.
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Strongbow, first produced in the UK in the 1960s, is the world’s best-selling cider brand. Heineken has owned it since 2008 and launched the brand locally in 2016.
The Dutch multinational currently operates in 23 countries in Africa, so this acquisition would give it a significant foothold on the continent and greater access to East African markets.
In South Africa, Heineken already owns and operates a network of 13 distribution depots and undertakes its own primary and secondary distribution to supply its products.
The group’s Sedibeng brewery in Johannesburg is its largest outside Europe. It produces Heineken, Amstel, Windhoek and Strongbow cider. Developed as a joint venture between Heineken and Diageo, the brewery opened in 2010. In 2019, the group embarked on a €60-million (R952m) expansion of the brewery to meet growing demand, from 5.3 million hectolitres to 7.5 million hectolitres a year.
It also produces local craft beer brands including Jack Black and Stellenbrau, as well as Fox, a cider brand introduced in 2020.
Heineken is a significant manufacturer of cider in South Africa and competes with Distell in this segment.
In November 2021, Heineken announced its intention to purchase the Distell operations.
Heineken CEO Dolf van den Brink told Reuters last year that the deal would improve logistics and increase points of sale, often shared for beer, wine and spirits in SA, and would do the same in Namibia. It also offered growth in other African markets, such as Kenya and Tanzania, he said.
“It should not be seen that we now start to buy spirits and wine companies all over the world,” Van den Brink said.
Once approved, the company would control more than 65% of the FABS market and become the largest supplier of ciders in SA.
The deal is worth R40.1-billion, which translates to R165 per Newco share and R15 per CapeVin share, should shareholders opt to cash out.
In a statement, the Competition Commission said it had agreed on a number of public interest commitments in South Africa with the merging parties. These include:
- An investment of more than R10-billion over a period of five years to maintain and grow the aggregate productive capacity of its operations and related facilities in South Africa;
- To implement an employee share ownership scheme that will transfer more than R3-billion of equity to workers of the merged entity’s SA operations;
- Establish a R400-million supplier development fund to invest in SMEs and historically disadvantaged person-controlled suppliers;
- Contribute R200-million to promote localisation and growth initiatives within SA;
- Invest R175-million in a tavern transformation programme; and
- Establish an innovation, research and development hub in SA within five years.
The parties have also agreed to maintain aggregate employee numbers for a period of five years after the merger and not to retrench any staff below specified managerial grades, and if there are any retrenchments, to consider finding vacancies in Newco for a period of three years.
A Heineken spokesperson told Business Maverick that they were pleased at the development.
“We are very excited to bring together three strong businesses to create a regional beverage champion, and we are committed to being a strong partner for growth and to make a positive impact in the communities in which we operate.”
Heineken said the divestment of the Strongbow licence in SA and other SACU countries (Botswana, Lesotho, Namibia and Eswatini) has no impact on the ownership or strategic direction of the brand in any other African or international markets.
“Strongbow has always been a very important strategic global brand for Heineken, and it will remain so, while also providing a strategic investor a strong opportunity for growth in SA and other SACU countries.” DM/BM