An offer by listed brewer East African Breweries Limited (EABL) to buy out minority shareholders in its Ugandan subsidiary fell short of the target, realising just 7.9 percent of the 2.18 million shares that it had hoped to buy.
The company said it received sale offers of only 151,156 shares of Uganda Breweries Limited (UBL), meaning most of the small owners opted to sit out the transaction. EABL will pay Sh30.17 million for these shares.
EABL opened the tender offer on September 3, 2024, pricing each of the units at Ush5,360 (Sh199.57) for a total purchase value of Sh434.7 million (at today’s exchange rate).
Before rolling out the tender, EABL held a 98.19 percent stake or 118.29 million shares of the Ugandan brewer, which at the offer price was valued at Sh23.6 billion. Post transaction, the company will end up with a 98.32 percent stake, or 118.44 million shares.
“The transfer of 78,268 ordinary shares to EABL has been effected and EABL has finalised payments for each accepting shareholder's final entitlement in accordance with the preferred method of payment indicated in their tender offer acceptance form,” said the company in a statement.
“The transfer of the remaining 72,888 ordinary shares to EABL is in the process of being effected, and EABL will pay the final entitlement…once the transfers are completed.”
The company in its statement did not comment on why the offer was undersubscribed.
EABL ran the offer on a “willing buyer, willing seller” basis, with no element of pressure on shareholders who would opt to hold on to their stock.
The Uganda subsidiary is, however, not listed meaning that EABL did not have the benefit of a market-determined price discovery process.
Instead, the company said it had contracted the services of an independent valuer to determine the best estimate of the price for the transaction.
Therefore, the book value of the share capital would not be used to determine the selling price of the shares, with EABL adding that the pricing was based on the independent valuer's best estimate of what a willing buyer and willing seller in an open market would agree to transact.
The valuation also took into consideration the current and projected earnings, the market valuation of assets, earnings and growth potential, and also the value of intangible assets.
UBL is one of four EABL subsidiaries—out of 12 in total— in which the brewer does not have a 100 percent holding.
Others where the holding is partial include Serengeti Breweries Limited in Tanzania (92.5 percent), UDV (Kenya) Limited (46 percent), and East African Beverages (South Sudan) Limited (99 percent).
In pursuing the buyout of the minority stake in UBL through a tender offer, EABL followed in the example of its British parent Diageo which purchased an additional 14.97 percent stake in the company through a similar plan in March 2023.
Diageo, which executed the acquisition through its wholly-owned subsidiary Diageo Kenya, saw its stake rise from 50.03 percent to 65 percent after buying the additional 118.4 million shares in the brewer for Sh192 per unit, valuing the deal at Sh22.7 billion.
