Diageo completes £117m South Africa restructure

Diageo has completed the restructuring of its business in South Africa, terminating a series of joint ventures with both Heineken and the Ohlthaver & List group, which holds a majority stake in Namibian Breweries.

The deal, worth £117 million to Diageo, has seen the drinks giant sell its 42.25% equity stake in Diageo Heineken Drinks (DHN), its 25% equity stake in South Africa’s Sedibeng brewery to Namibia Breweries (NBL) and its 15% equity stake in Namibia Breweries to Heineken.

In return, Diageo has acquired the remaining shares it doesn’t already own in Brandhouse Beverages – a joint venture established in 2004 between Diageo, Heineken International and Namibia Breweries to sell Diageo’s spirit, RTD, cider and Guinness brands.

The sale of its interests in Sedibeng, DHN and NBL are worth ZAR 2.5 billion (£117 million) to Diageo.

Confirming its completion this morning, a spokesperson for Diageo said: “The closing of the transaction follows the fulfilment of all conditions precedent as agreed on 28 July 2015, when the intention to restructure the joint ventures was announced. Diageo has received a total net cash consideration of c. ZAR 2.5 billion (c. £117 million) for the equity and debt positions Diageo sold in Sedibeng, DHN and NBL.”

Announcing the split in July, Diageo CEO Ivan Menezes said he believed that Diageo has the “necessary scale to move to the next stage of growth for spirits, RTDs and our beer and cider portfolio”, as part of a “focused, simplified ownership structure.”

Jean-François van Boxmeer, Heineken CEO & chairman of the Heineken executive board, said the decision to split from Diageo would allow it to focus “solely on the beer category”.

In addition to the restructuring of its business in South Africa, Diageo’s interests in Asia and the Caribbean have also been reviewed, with the company off-loading its brewing interests in Jamaica, Malaysia and Singapore to Dutch rival Heineken.

The deal will see Diageo increase its stake in Ghanian brewer, Guinness Ghana Breweries, buying Heineken’s 20% stake to increase its share to 72.4%. Heineken meanwhile will acquire Diageo’s shares in Jamaican brewer Desnoes & Geddes, which produces Red Stripe and Dragon, taking majority ownership, and GAPL Pte Limited (GAPL), which is listed on the Malaysian Stock Exchange.

The deal is worth $780.5 million to Diageo and will see the company take home a one-off profit of £440 million ($671 million) after tax.