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17 March 2023

Heineken’s acquisition of drinks firm Distell passes regulatory hurdles

South Africa – At long last. South Africa’s Competition Tribunal, on 9 March, granted Heineken approval to take control of Distell Group and Namibia Breweries. This allows Heineken to create a new business in Africa.

Once the transaction is completed in April, Heineken will obtain majority control of the combined entities. Heineken plans to invest EUR 2.4 billion (USD 2.5 billion) in return for a 65 percent stake in the newly formed company. The investment will consist of a cash payment of EUR 1.2 billion and the contribution of its currently owned assets, including 75 percent of Heineken South Africa, its export business in certain other African markets and its interest in Namibia Breweries.

The remaining 35 percent of the new company will be owned by Distell’s shareholders should they choose to invest in the business.

Distell is a major player in ciders, flavoured alcoholic beverages, wines and spirits across the continent, while Namibia Breweries is the beer market leader in Namibia.

The sale of Strongbow

The transaction was announced in November 2021. South African Breweries, a subsidiary of AB-InBev, objected to the deal, arguing that it would remove an effective competitor in the market for cider. Combined, Heineken and Distell would have owned the three leading cider brands in South Africa - Strongbow (Heineken), Hunter’s and Savannah (Distell) – and controlled more than 65 percent of the segment. Strongbow alone represented USD 94 million in sales and USD 11 million in profit in 2021, according to Distell’s prospectus (January 2023).

In September 2022, the South African Competition Commission okayed the deal on condition that Heineken disposes its Strongbow cider business in South Africa and other countries that are members of the Southern African Customs Union.

During the January hearing at the Competition Tribunal, which had the final say, it emerged that AB-InBev would like to enter the cider market, and initially showed interest in buying the Strongbow licence before walking away.

The Tribunal reiterated the Commission’s view and agreed that the sale of Strongbow shall be to “a credible and majority black-owned business” to promote new entry and transformation. Market observers are uncertain which buyer Heineken could have in its sights.