East African Breweries fails to fully acquire Ugandan unit

East African Breweries Ltd’s (EABL) plan to fully acquire one of its subsidiaries in Uganda has hit a snag after most minority shareholders declined the offer issued in September last year.

The NSE-listed brewer intended to mop up 2,177,995 shares (1.81 per cent stake) held by the dormant minorities in Uganda Breweries Limited (UBL) but managed to get only 151,156 by the close of tender on March 5.

The close of the tender announcement in a local daily on Thursday shows that EABL has now pushed up its shareholding to 98.32 per cent in the Ugandan unit.

“Following the completion of the tender offer, EABL will hold in aggregate 118,444,469 ordinary shares representing 98.32 of the issued ordinary shares of UBL, which includes the ordinary shares that EABL owned prior to commencement of the tender offer,’’ the notice reads in part.

Following the results, 78,268 shares have already been transferred to EABL and payment done while the payment and transfer of the remaining 78,888 is being processed.

The brewer, which also trades at the Uganda Securities Exchange (USE) had offered a premium of Sh199.6 (Ush5, 630) per share to willing sellers.

The poor subscription has affected EABL’s trading at the Kampala bourse, with the share price dropping to Ush5,089 (Sh180) on Thursday from Ush5,282 (Sh187.7) since March 3 when the tender was closed.

It hit a record high of Ush5,630 (Sh199.6) in September last year following the offer announcement. If the tender offer is accepted in full, EABL will hold 120,471,208 ordinary shares, representing 100 per cent of UBL’s issued share capital.

Apart from UBL, EABL also owns 100 per cent of International Distillers Uganda Ltd and 100 per cent of East African Maltings (Uganda) Ltd.

Other subsidiaries under EABL are Kenya Breweries Ltd, East African Maltings (Kenya) Ltd, UDV (Kenya) Ltd, Allsopps (EA) Sales Ltd and EABL International Ltd in Kenya.

EABL also owns East African Beverages (South Sudan) Ltd, East African Breweries (Rwanda) Ltd, EABL Tanzania Ltd and Serengeti Breweries Ltd, also in Tanzania.

According to EABL’s latest financial statements, Uganda is the manufacturer’s second most profitable market.

EABL’s profit after tax in the year to June 30, 2024, declined to Sh10.9 billion from Sh12.3 billion the firm reported over the same period last year.

According to the brewer, the 12 per cent drop in profitability, despite net sales rising 13 per cent to Sh124.1 billion was triggered by significant increases in interest rates and currency devaluation in first half of the year under review.

“Our sales increased in all countries by 15 per cent in Kenya, 12 per cent in Uganda and nine per cent in Tanzania,” the statement reads.

“Kenya remains EABL’s largest market, with 65 per cent of sales followed by Uganda, contributing 21 per cent and Tanzania 14 per cent.

Unlike Uganda, Kenya’s market for EABL has in the recent past been turbulent due to the tax regime; particularly excise duty that squeezed more from the manufacturer.