Heineken has approached Distell Group Holdings, to buy a majority stake in Africa’s leading producer and marketer of spirits, wines, ciders and ready-to-drinks. The world’s second largest brewing group confirmed today in a statement “that it is currently engaged with Distell regarding a potential transaction” and that “discussions are ongoing.” However, Heineken also said “that there can be no certainty that an agreement will be reached.”
A takeover of Distell, which has a market value of ZAR 31.8 billion (USD 2.26bn), would be Heineken’s most significant transaction in years, Bloomberg reported. By buying Distell, Heineken would gain access to Distell’s huge sales network not only in South Africa but also in other African countries where Heinken traditionally is not as strong as in other parts of the world.
However, synergies with other product categories are rather limited, as Heineken has so far no major interests in the spirits market. Analysts point out that the move could point out a shift in strategy of Heineken’s new CEO Dolf van den Brink who succeeded in June 2020 Heineken’s CEO Jean-François van Boxmeer, who led the fortunes of the Dutch brewer for over 15 years.
Distell, is headquartered in Stellenbosch, South Africa, and is a publicly listed company on the Johannesburg Stock Exchange (JSE). Major shareholders is Remgro Ltd., a diversified investment holding company, controlled by magnate Johann Peter Rupert who is also the chairman of the Swiss-based luxury-goods company Richemont, a companyhe founded in in 1988. Remgro holds indirectly through a joint venture with Capevin Holdings a 31.8% stake in Distell with voting rights equal 56.4%.
Until 5 years ago, the world’s second largest brewing group SAB Miller was also one of the major shareholders in Distell. When AB InBev bought SAB Miller in 2016 in order to comply with anti-trust regulations, the 26.4 percent stake in Distell Group was sold at a reported sales price of roughly 9 billion rand (USD 645 million) to Public Investment Corporation (inside.beer,19.11.2019), a public asset management firm wholly owned by the South African government, with the Minister of Finance as the sole shareholder representative of the government. Remgo and Capevin Holdings decided at that time not to exercise their pre-emptive rights.
In February, Distell released its unaudited interim financial results for the 6 months ended 31 December 2020. In a period of uncertainty and disruption, the group commendably grew revenue by 3.8% to R15,4 billion on 0.8% higher volumes. Revenue excluding excise duty grew by 2.5%. In the domestic market, while 41 trading days were lost during the reporting period due to the second and third sale of alcohol bans introduced by government, domestic revenue declined by only 0.5% with sales volumes down by 1.4%. This was achieved through a combination of Distell’s diverse product portfolio with strong brands alongside improved customer execution when allowed to trade.
“The pandemic acted as a catalyst for internal capability shifts that were already underway at Distell. The work we have been doing over the past years – in terms of manufacturing capacity, efficiencies, innovation and our culture change and digital transformation journeys – fortuitously positioned us to survive and thrive in a new post-pandemic world,” said Richard Rushton, CEO of Distell Group in February.
Market share gains were made across all three categories. Following a successful implementation of its digital Business-to-Business (B2B) sales platform earlier in the year, Distell saw a high rate of customer adoption which is growing revenues and volumes at a faster pace than non-platform customers. Growth in e-commerce business for the six months period has already reached what was achieved in the previous reported full financial year.
African markets, outside South Africa, delivered strong revenue growth of 12.7% on sales volumes which increased by 11.7%. Focus markets on the African continent, outside the Botswana, Lesotho, Namibia and eSwatini (BLNE) countries, grew revenue by 19.9% and volumes by 20,3% with strong revenue and volume growth across all three categories. Kenya, Nigeria and Mozambique all recorded strong double-digit growth growth as investments in people, systems and skills to continue the route-to-market (RTM) roll-out and in-country production deliver on our strategic intent to grow the business across the continent. This initiative has seen the customer footprint grow to 37.500 sales outlets in Africa (excl. BLNE) from 9.000 two years ago.