With Distell’s takeover, Heineken is growing its African ambitions

Heineken, the second largest brewer in the world, had previously left Africa – considered unattractive – to its competitors. However, its managers eventually refined their analysis and investments multiplied: in Ethiopia (2011), in South Africa (2015), in Côte d’Ivoire (2017) and in Mozambique (2018).

Last November, the Dutch giant took another step forward by announcing that it would be taking over the South African wine and spirits group Distell. The deal is valued at €2.2bn ($2.4bn), of which €1.3bn ($1.4bn) will be paid directly by the buyer. The remainder will be offset by a contribution of shares in Heineken’s South African subsidiary.

Appointed in June 2020 as head of the Dutch brewing giant, Dolf van den Brink’s deal is his first growth operation. He had first sought to regain financial leeway by cutting 8,000 jobs.

Stronger presence in parts of the continent

Heineken is thus strengthening its presence in the Southern African markets and some East African markets, where it is competing with the British wine and spirits group Diageo and the Belgian-Brazilian world beer leader AB InBev, which acquired the South African SABMiller in 2015.

Exclusive discussions between the parties started in May 2021. Heineken is being advised by the Dutch law firm De Brauw Blackstone Westbroek, the South African law firm Webber Wentzel and the Japanese investment bank Nomura. Distell sought counsel from South African lawyers ENSafrica and the local bank RMB.

The deal gives the Amsterdam-based group control over popular brands, such as Amarula liqueur, Nederburg and Two Oceans wines and Savanna cider. Distell, the world’s second largest cider producer, generates 75% of its revenues in South Africa.

Offering new growth prospects

In February, the majority of the South African group’s shareholders approved the brewer’s plan, which also provides for the sale of part of Distell’s portfolio, including Bunnahabhain, Deanston and Tobermory Scotch whiskies.

These brands will be combined in a holding company controlled by the South African investment company Remgro, in which Heineken will remain one of the minority shareholders. Three months earlier, in November, the Dutch group had also indicated its intention to take control of Namibia Breweries, in which it already holds a 49% stake. This transaction is valued at €400m ($441m).

Following the completion of these two transactions, which are subject to shareholder and regulatory approval and are expected to be completed during the third quarter of 2022, Heineken’s objective is to create a regional beverage champion. The assets of Distell, Namibia Breweries and Heineken subsidiaries will be controlled by the world’s number two beer company through a holding firm known as Newco, which will be worth some €4bn ($4.4bn).

According to Brink, this new organisation will create commercial and logistical synergies between the brands in South Africa and Namibia, and will offer new growth opportunities in other markets, such as Kenya and Tanzania. “Don’t expect us to buy wine and spirits companies all over the world,” he said during a past event.