Buying time

The ruling by the High Court in London has granted SABMiller an injunction which stops Kenya’s East African Breweries (EABL), which is majority-owned by Diageo, from purchasing Serengeti Breweries in Tanzania, which is the number two brewer behind SABMiller’s Tanzania Breweries (TBL).

EABL is seeking to acquire a stake in privately-owned Serengeti, which SABMiller claims is in breach of a contract between SABMiller and Diageo dating back to 2002.

The judgement said the dispute would be determined by an International Chamber of Commerce arbitration in London.

According to SABMiller, EABL will be prevented from acquiring Serengeti until January 2011 regardless of the outcome of arbitration.

But January 2011 is only 17 months away. For Diageo, that’s plenty of time to think of clever ways to come to Serengeti’s rescue (the group is reportedly strapped for cash) without buying it outright.

For SABMiller, that may not be long enough to devise a strategy as to fend off an emboldened Serengeti in Tanzania and attack EABL on its home turf in Kenya. SABMiller tried that before in the late 1990s but lost the battle. Hence the 2002 non-aggression contract between the two brewers.