Breweries drop Sedibeng share

Namibia Breweries Limited has back-peddled on a deal in which it was initially meant to acquire a 15% stake in the Sedibeng Brewery in Gauteng, South Africa. The plant currently brews Windhoek Lager for the South African market and is jointly owned by Diageo and Heineken.

Patricia Hoeksema, Group Manager: Corporate Relations at Ohlthaver & List Group of Companies, in response to queries made by the Economist, confirmed that the deal regarding the plant was off. She said “The negotiations relating to the proposed acquisition of [the] Sedibeng [plant] have been terminated and will thus not take place. In view of the aforesaid no financing is required.”
Hoeksema could not say whether Namibia Breweries cancelled the deal entirely and added that the issue of the Sedibeng plant is certainly not off the cards.
Added Hoeksema, “The proposal was considered and not deemed a priority at present.” The brewer had set its sights on acquiring a stake in the plant for some time and first issued a cautionary on 7 March 2012. The cautionary was subsequently withdrawn by Namibia Breweries.
Should the deal not have fallen through, Namibia Breweries Limited would have increased its stake in the same proportion as is with the special purpose vehicle that was created and called DHN Drinks (Pty) Ltd. This shell company was formed on the back of a joint venture between Diageo, Heineken and Namibia Breweries in South Africa in 2008.  Diageo and Heineken each holds stakes amounting to 42.25% in DHN Drinks while Namibia Breweries holds a 15% stake in the special purpose vehicle. DHN Drinks bears the mark of each of its three beer brewing shareholders. DHN Drinks is a brand holding and profit sharing company with no employees.
The Competition Tribunal of South Africa in 2012 unconditionally approved the merger between DHN Drinks (Pty) Limited and Sedibeng Breweries (Pty) Limited, and cited the merger as an internal restructuring exercise.  
Through the merger, it was anticipated that Diageo would up its shareholding in Sedibeng Breweries significantly, reducing the 75% stake held by Heineken to 42.25%, mirroring the shareholding structure of the shell company. The Sedibeng facility stands on a 83 hectare site comprising a brewery, production plant and a warehouse managed by Brandhouse. With an initial capacity of 3 million hectoliters, the brewery was expanded to further increase capacity by 1 million hectolitres in anticipation of growing demand for its premium brands.  The plant was built at a cost of N$3.5 billion. According to Hoeksema, Namibia Breweries did not help finance the construction of the brewing plant and does not hold a stake in the plant. The plant currently employs 225 people.