The Competition Commission has recommended the R40.1bn Heineken buyout of SA’s largest alcohol producer, Distell, go ahead with conditions, including the sale of the brewer’s Strongbow cider business in SA.
The Competition Tribunal now needs to decide on whether to approve the merger of the world’s largest cider producer with Distell, the second largest, and whose brands Savanna and Hunters are growing in popularity in SA and Kenya.
In a prospectus about the deal in January, Heineken had suggested it might sell the local arm of the Strongbow brand to be proactive about competition authority concerns, but told Business Day at the time it would keep control of the brand in other markets.
First touted in May 2021, the offer was announced in November. It will see Distell delist from the JSE.
The prospectus, a document about the deal given to shareholders before they vote on it, shows the Strongbow brand brought in revenue of R1.1bn in SA in the 2021 financial year, but was loss-making locally in a year that included lockdown bans.
Because Heineken is buying the two biggest cider brands locally, Savanna and Hunter’s Dry, the commission wants Heineken to sell its cider brand in SA and in Lesotho, Botswana, Namibia and Eswatini. The commission said the sale must be conducted “in a manner that promotes transformation”.
Other conditions include that Heineken will invest R10bn over five years and set up an employee share ownership scheme that will transfer more than R3bn in equity to workers.
It will also invest R175m in a tavern transformation programme and invest R400m in a supplier development fund.
Distell and Heineken have agreed to maintain an undisclosed headcount for five years after the merger.
The proposed merger will split Distell into two units. One will contain the cider, spirits and wine business and will be combined with Heineken’s interests in Southern Africa, including Namibia, into a company called Newco. The European brewer is paying R165 a share for this business.
Heineken will hold a minimum of 65% in Newco and the rest will be held by Distell shareholders who elect to reinvest, while there will also be a minimum 15% BEE shareholding.
The Scotch whisky business will be housed in a Distell subsidiary named Capevin. JSE-listed Remgro, the major owner of Distell, will hold a majority stake. Shareholders who sell their stake in the whisky business, whose brands include Scottish Leader and Bunnahabhain, will receive R15 a share.
Shareholder Ninety One has said the R180 offer per share was too low.
By the JSE’s close on Friday Distell’s share price had risen 1.76% to R176.56.
Update: September 10 2022
This story has been updated with Distell’s closing share price on Friday.
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