The South African Competition Commission has conditionally recommended the approval of Dutch giant Heineken’s proposed takeover of parts of South Africa’s largest alcohol producer Distell, with the parties having agreed to invest more than R10 billion on their local operational footprint as well as transfer more than R3 billion in shares to workers.
Heineken, the world’s second-largest brewer, announced in late 2021 it was looking to buy Distell for about R40 billion, which would create a new regional drinks giant in competition with larger rival Anheuser-Busch InBev. That deal was approved by Distell’s shareholders in February, and the commission’s recommendation will now be put to the Competition Tribunal, which acts like a court on merger matters and has the final say.
The commission said in a statement on Friday that, taken as a whole, the transaction is likely to substantially prevent or lessen competition in the merged entity’s relevant markets. It would be a dominant supplier of flavoured-alcoholic beverages with a market share of above 65% as well as be the largest cider supplier, with Distell’s brands including Savanna and Hunters Dry, while Heineken owns Strongbow and the Fox brands.
To address this, the parties have agreed that Heineken will sell Strongbow in “a manner that promotes transformation in the industry”, the commission said.
Parties have also agreed to a number of public interest commitments, including R10 billion over five years to maintain and grow the productive operations in SA, as well as an employee share ownership scheme that would transfer more than R3 billion equity to its local workers.
Also required is a R400 million supplier development fund, R200 million to promote localisation and growth initiatives in SA, as well as a commitment to maintain its employee head count for five years.
R175 million must also be spent on a “tavern transformation programme to create safe, responsible and sustainable businesses with a positive impact for consumers and society”.
The deal will see the creation of two separate businesses: one containing the cider, ready-to-drink beverages, and spirits and wine business; and the other consisting of Distell’s remaining assets, including its Scotch whisky business, which will be housed in a Distell subsidiary named Capevin. Once final conditions are approved, Heineken will own a minimum of 65% of the new entity after implementation of the transaction, but Distell shareholders will be able to reinvest and hold up to 35%.
Distell’s shares were up 1.15% to R175.50 in late afternoon trade on Friday, and had been trading slightly lower just before the announcement was made.- fin24
