THE world’s biggest brewer Netherlands-based Heineken has made a R38.5 billion offer for Distell, South Africa’s biggest alcohol group and the owner of brands such as Amarula, Nederburg, JC le Roux and Savanna.
Distell’s share price, however, fell more than 7 percent to R169.57 by midday yesterday, indicating that some shareholders may have been expecting a higher price as the price had peaked at R182.59 on Friday, which is more than the R180 per share that Heineken is offering. The price is, however, well above the R133.35 average price six months ago, when Heineken first expressed its interest.
The R40.1bn total offer, a substantial new direct foreign investment into South Africa, comes six months after Heineken first expressed an interest to acquire Remgro-controlled Distell. It includes the acquisition of Namibia Breweries and will lead to the formation of a southern Africa drinks business worth R69.5bn. Heineken owns production facilities in more than 70 countries.
Vestact Asset management chief executive Paul Theron said yesterday’s lower share price on the JSE indicated some Distell shareholders might have over-reached themselves in the hope the Heineken offer would be higher. He said the deal was an interesting one for Heineken, which was focused on beer markets, and primarily its own brand.
Andrew Bahlmann, the chief executive: corporate advisory firm Deal Leaders Africa, who was commenting on the transaction, said, “Announcements of foreign direct investments (FDI) into South Africa are coming thick and fast at the moment, these are hopeful signs for South Africa.”
The Heineken announcement comes close behind the COP26 announcement of $8.5bn renewables funding for South Africa, the R15bn investment by Vantage Data Centres at Attacq’s Waterfall development, as well as a substantial investment by China technology giant Huawei in its cloud computing service in South Africa.
Distell’s cider, ready-to-drink beverages, and spirits and wine business will be combined with Heineken’s interests in Southern Africa, including Namibia, and select export markets in east Africa. The aim is for a world-class, unlisted, Southern-African focused, alcoholic beverages business with a leading international beer and cider portfolio, combining the complementary brands, talent and skills of Distell, Heineken and Namibia Breweries, and which will also have a significant presence in adjacent African markets.
“We can expect assertive action by Heineken. As the world’s second largest brewer it embraces best of breed technologies in every respect. It will set the standard in this country’s liquor sector for carbon emissions, for instance, it is focused on driving a renewable energy step change in its production sites: tripling green electricity and piloting new technologies in renewable thermal energy. The company is rapidly expanding its low carbon farming programme from eight to 15 countries by 2022,” said Bahlman.
The transaction comprises a scheme of arrangement and certain initial steps to be implemented if all the required regulatory and other approvals are received. Distell shareholders vote on the deal.
One of these steps entails restructuring Distell to create 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.
Heineken’s R180 per share offer price values Distell’s business at R40.1bn, representing a 35 percent and 53 percent premium to 30-day and 90-day average share prices, respectively, to May 17, the day before Heineken first expressed an interest in Distell.
In terms of the scheme, Distell shareholders will receive offers from Heineken and one of its subsidiaries, referred to as Newco, to acquire their Distell shares and also their Capevin shares, which Distell shareholders will receive as part of the scheme. Empowerment ownership would be enhanced after the transaction was completed.
Distell chief executive Richard Rushton said the partnership had the potential to leverage the strength of Heineken’s global footprint with Distell’s leading brands to create a formidable, diverse beverage company for Africa.
“We will have a stronger route-to-market with a unique multi-category portfolio, furthering our growth and ability to compete on scale. I am excited for what lies ahead as we look to combine our strong and popular brands and highly complementary geographical footprints.”
Heineken’s chief executive Dolf van den Brink said: “We are excited to bring together three strong businesses (that are) perfectly positioned to capture significant growth opportunities in Southern Africa.”
Remgro, which owns 31.3 percent of Distell’s listed shares and controls 56.4 percent of its voting interests, said it would vote its Distell shares in favour of the scheme and intended to elect to receive Newco shares for its Distell shares, and it also intended to not accept the cash offer to be made by Heineken for the Capevin share, leaving Remgro with a controlling shareholding in Capevin that mirrors its current controlling shareholding in Distell. Capevin will hold Distell’s current whisky and spirits interests.
As at June 30 2021, the market value and accounting net asset value of Remgro’s holding in Distell amounted to R11.7bn, representing 11.6 percent of Remgro’s intrinsic net asset value.
BUSINESS REPORT ONLINE