SABMiller agrees to multi-million black economic empowerment deal

Participants in the deal will include SAB’s employees, black-owned licensed liquor retailers and retail liquor licence applicants, as well as registered black-owned customers of ABI, the soft drinks division of SAB, and the broader South African community through a newly established SAB Foundation.

Under the terms of the transaction, SAB will issue three new classes of ordinary shares in SAB, in aggregate comprising 8.45 percent of SAB’s enlarged issued share capital, to three separate investment entities, which will hold the interests of the participants.

The transaction period is expected to be ten years and meaningful cash dividends are to be paid to participants from the first year.

What they did not say: the transaction also serves as an insurance policy. It guarantees that shebeen-owners-turned-SAB-investors will not defect in large numbers to SAB’s main competitor Heineken since it is now in their self-interest to continue selling SAB’s beers.

Together with Diageo, Heineken has built a 3 million hl brewery in South Africa which will officially be opened next year in time for the football world championship.

Heineken and its partner Diageo hope to take market share away from SAB. SAB’s share has dropped to slightly over 90 percent this year from 98 percent a decade ago.