EABL set to con­vert Sh15bn Serengeti loan

FINE Com­pany hit with inan­cial penalty over ac­qui­si­tion deal

Business Daily (Kenya) - - CORPORATE NEWS - David Herbling hdavid@ke.na­tion­media.com

Tan­za­nia’s an­titrust agency has fined East African Brew­eries Ltd an undis­closed amount over fail­ure to meet the terms at­tached to the deal when the com­pany ac­quired a con­trol­ling stake in Serengeti Brew­eries.

The firm was hit with the fi­nan­cial penalty to set­tle the dis­pute in which the Fair Com­pe­ti­tion Com­mis­sion had ac­cused the brewer of not mak­ing good on the prom­ises made when it ob­tained ap­proval for the deal in 2010. EABL group fi­nance di­rec­tor György Geiszl de­clined to re­veal the size of the fine, say­ing the mat­ter was “con­fi­den­tial in­for­ma­tion” and was im­ma­te­rial to the fi­nan­cial per­for­mance.

“The cost of set­tle­ment was al­ready pro­vided for in the fis­cal year 2016, so there was no im­pact on the year to June 2017 fi­nan­cials,” said Dr Geiszl at an in­vestor brief­ing on Fri­day.

EABL’S con­tin­gent li­a­bil­i­ties marked as “pend­ing le­gal cases” nearly tripled to Sh793.7 mil­lion in June 2016 from Sh298.8 mil­lion the previous year, ac­cord­ing to the brewer’s lat­est an­nual re­port.

In July 2015, Tan­za­nian au­thor­i­ties threat­ened to re­voke the Sh4.9 bil­lion deal, cit­ing breach of takeover con­di­tions in terms of grow­ing Serengeti’s sales, mar­ket share, and mak­ing cap­i­tal in­vest­ments.

“It was ob­served that, based on the ra­tio­nale of the ap­proval, the per­for­mance of Serengeti Brew­eries Ltd was not as per ex­pec­ta­tions of the com­mis­sion,” FCC said. EABL, con­trolled by UK’S Di­a­geo, sold its 20 per cent stake in Tan­za­nia Brew­eries in 2010 and moved to buy a 51 per cent stake in the loss-mak­ing Serengeti.

Dr Geiszl said fol­low­ing set­tle­ment of the dis­pute, EABL plans to re­struc­ture Serengeti’s bal­ance sheet by con­ver­sion of loan to eq­uity, but its stake will re­main un­changed at 51 per cent.

“We have an agree­ment with class B share­hold­ers to com­plete cap­i­tal re­struc­tur­ing of Serengeti, to re­store eq­uity po­si­tion and statu­tory prof­itabil­ity,” he said.

EABL net earn­ings for the year to June 2017 dropped 17 per cent to Sh8.5 bil­lion, blamed on the ab­sence of gains from as­set dis­pos­als re­ceived in the previous year.

EABL, con­trolled by UK’S Di­a­geo, sold its 20 per cent stake in Tan­za­nia Brew­eries in 2010 The cost of set­tle­ment was al­ready pro­vided for in the is­cal year 2016.” GYÖRGY GEISZL, | EABL GROUP FI­NANCE DI­REC­TOR

IN­VEST­MENT A sec­tion of the East African Brew­eries Lim­ited plant in Nairobi.--file

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