Competition body allows Heineken to buy Distell but must sell some brands

News reaching BusinessTech Africa is that the Competition Commission has recommended the approval of Dutch giant Heineken’s proposed takeover of parts of South Africa’s largest alcohol producer Distell. 
 
The two parties have reached an agreement to invest more than R10 billion in their local operational footprint as well as transfer more than R3 billion in shares to workers – but there are conditions on the approval. 
 
Media reports in South Africa indicate that beermaker, Heineken as the world’s second-largest brewer, announced in late 2021 it was looking to buy Distell for about R40 billion. 
 
Following the takeover, it planned to create a new regional drinks giant in competition with larger rival Anheuser-Busch InBev. 
 
News24 has it that deal was approved by Distell’s shareholders in February, and the commission’s recommendation will now be put to the Competition Tribunal, which acts like a court on merger matters and has the final say on the matter. 
 
“The commission said in a statement on Friday that, taken as a whole, the transaction is likely to substantially prevent or lessen competition in the merged entity’s relevant markets,” the website reported. 
 
“It would be a dominant supplier of flavored-alcoholic beverages with a market share of above 65% as well as be the largest cider supplier, with Distell’s brands including Savanna and Hunters Dry, while Heineken owns Strongbow and the Fox brands. 
 
“To address this, the parties have agreed that Heineken will sell Strongbow in “a manner that promotes transformation in the industry. 
 
“Parties have also agreed to a number of public interest commitments, including R10 billion over five years to maintain and grow the productive operations in SA, as well as an employee share ownership scheme that would transfer more than R3 billion equity to its local workers.” 
 
In the same report, the Cape Town-based website published that also required is a R400 million supplier development fund, R200 million to promote localisation and growth initiatives in the country, as well as a commitment to maintaining its employee head count for five years. 
 
“R175 million must also be spent on a tavern transformation programme to create safe, responsible and sustainable businesses with a positive impact for consumers and society,” indicates the report. 
 
“The deal will see the creation of 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.” 
 
Once final conditions are approved, the Netherlands-based brewer will own a minimum of 65% of the new business after the implementation of the transaction, but Distell shareholders will be able to reinvest and own up to 35%. 
 
Following the announcement, Distell’s shares went up by 1.15% to R175.50 in late afternoon trade on Friday but were trading slightly lower just before the announcement was publicised. 
 
Image:Heineken Beer/Reuters/Heineken