Completion of the transaction would yield a powerful South Africa-focused drinks entity with a portfolio spanning beer, wine, spirits, flavoured alcoholic beverages, cider and liqueur brands. Source: Heineken Annual Report 2020.

Heineken has made a firm offer for South Africa’s Distell Group Holdings Limited (Distell) as the Dutch brewer plans a merger to create a powerful new beverage entity worth approximately €4 billion/$4.6 billion.

The transaction will involve Heineken paying €1.3 billion in cash as it seeks to take control of Stellenbosch-headquartered Distell, together with Namibia Breweries Ltd (NBL).

Heineken will make a recommended cash offer of R180 per Distell share, equating to a total valuation of R40.1 billion/$2.6 billion.

Together with the acquisition of Ohlthaver & List Group of Companies (O&L), the three parties would combine with Heineken South Africa to create a new majority-owned, unlisted public holding firm (referred to as Newco), with Heineken holding a shareholding of *at least 65%.

Under the proposal, Heineken will purchase in cash NBL’s 25% shareholding in Heineken South Africa (HSA).

INTERNAL RESTRUCTURING OF DISTELL

Heineken would purchase O&L’s 50.01% interest in NBL Investment Holdings (Proprietary) Limited (NBLIH), the controlling shareholder that owns 59.4% in NBL (Heineken already owns a 49.99% interest in NBLIH).

The transaction completion, expected in the course of 2022, is **subject to regulatory and shareholder approvals.

Acceptance of the offer for Distell’s entire share capital would affect an internal restructuring of the company to produce two separate businesses: one featuring the cider, ready-to-drink (RTD) beverages and wine & spirits arms, and the other comprising Distell’s remaining assets that includes its Scotch whisky business to reside in a subsidiary named Capevin.

The cider, RTD and wine & spirits business will twin with Heineken’s interests in Southern Africa, including Namibia, and select export markets in East Africa held by Newco.

Heineken says the fusion of the new businesses ‘will have a significantly strengthened and complementary route to market in South Africa and Namibia with further growth opportunities across Southern Africa”.

Dolf van den Brink, CEO and Chairman of the Executive Board, Heineken: “Together we will be able to better serve our consumers and customers through a unique combination of multi-category leading brands and a strengthened route-to-market.”

EYEING THE FINE PRINT…

Speaking to TRBusiness today, sources at Heineken and Distell were tight-lipped on the deal and its potential implications for their respective global duty free and travel retail divisions as they digest the details and discuss internally [we’ll aim to bring you commentary on the transaction in due course – Ed].

Dolf van den Brink, CEO and Chairman of the Executive Board, Heineken, said in a statement: “We are very excited to bring together three strong businesses to create a regional beverage champion, perfectly positioned to capture significant growth opportunities in Southern Africa.

“Distell is a highly regarded, resilient business with leading brands, a talented workforce and a strong track record of innovation and growth in Africa.

“With NBL, there are exciting opportunities to expand premium beer and cider in Namibia and grow the iconic Windhoek brand beyond its home market.

Heineken’s foray into the wine & spirits market would unlock brands such as Amarula (pictured), Nederburg, Two Oceans and a range of Scotch whiskies as the global brewer seeks to strengthen its footprint in Southern Africa and capitalise on route-to-market opportunities in countries such as Kenya and Tanzania.

“Together we will be able to better serve our consumers and customers through a unique combination of multi-category leading brands and a strengthened route-to-market.

“The businesses share common values derived from their family heritage, long-term perspectives, entrepreneurial spirit, and care for people and planet.

“We have successfully built our business in Africa over 100 years. Today’s announcement is a vote of confidence in the long-term prospects of South Africa and Namibia and we commit to being a strong partner for growth and to make a positive impact in the communities in which we operate.”

Richard Rushton, CEO, Distell said: “Today marks a major milestone in Distell’s journey. Our resilient business’ stand out performance and the excellence of our people have been recognised by a much-admired global brewer in Heineken.

The offer is testament to the strength of Distell’s leading position in South Africa and growth in select African markets, alongside the value of our brands and people providing the potential to immediately unlock significant value for our shareholders. 

“Together, this partnership has the potential to leverage the strength of Heineken’s global footprint with our leading brands to create a formidable, diverse beverage company for Africa.

“I am excited for what lies ahead as we look to combine our strong and popular brands and highly complementary geographical footprints to create a world-class African company in the alcohol beverage sector. Our combined entity will grow our local expertise and insights to better serve consumers across the region.

“Heineken and Distell collectively have family owned values with strong legacies in South Africa and are committed to continuing to play a strong role in addressing critical social and economic imperatives in the country.”

NBL Chairman Sven Thieme added: “What we have achieved with NBL is truly amazing, but the time has come to unleash its full potential, by giving NBL access to the world.

“Having worked with Heineken for many years and knowing that they too are passionate about beer and share similar family values and culture to that of O&L, we are confident that Heineken is best placed to do just that.”

*Distell shareholders will be able to reinvest and hold up to 35% in Newco; **Expressions of support for the transaction have been received from shareholders representing around 56% of the votes of Distell and 68% of the votes of minority shareholders from NBL.