The East African Breweries Limited (EABL) has offered to fully own Uganda Breweries Limited (UBL) by purchasing the latter’s remaining shares of 2,177,995 ordinary shares or 1.81 percent.
EABL already owns 98.19 percent stake in UBL but the Kenyan company has now proposed to buy all the remaining ordinary shares in the Ugandan beer company. If the tender is fully accepted, EABL will increase its holding to 120,471,208 ordinary shares, representing 100% of UBL’s issued share capital.
The offer is Shs5, 630 per share, which is very tempting to UBL shareholders given that UBL’s current share price is at Shs4, 388.24.
EABL’s current stake in UBL is valued at Shs659.2 billion.
The Capital Markets Authorities of Kenya and Uganda, along with the Nairobi Securities Exchange and Uganda Securities Exchange, have been notified of the tender offer as required by law.
The tender offer is open for six months, running until March 3, 2025, and is available only to shareholders recorded by September 2.
However, it is up to UBL shareholders to decide whether to accept or reject the offer.
EABL argues that the Tender Offer is consistent with their strategy for the East African market.
“EABL’s East African business continues to grow from strength to strength and is expanding its reach at pace. In addition, a resilient and adaptive approach by the East African business through the #Covid-19 pandemic combined with vibrant ecommerce growth has cemented EABL’s belief that this is an appropriate time to deepen its East African position,” the company said in a public statement last week.
“EABL therefore intends to convert UBL from a public company into a private company. The Tender Offer will help to address administrative and legal challenges faced by UBL which have arisen because a significant number of UBL’s minority Shareholders are uncontactable, such as: (i) non-attendance by minority shareholders at General Meetings which hinders the proper and efficient conduct of the business of UBL due to a lack of sufficient quorum; (ii) challenges maintaining an accurate and up to-date share register as is mandatorily required by section 119 of the Ugandan Companies Act, 2012; and (iii) the inability to contact minority Shareholders for routine matters regarding the business of UBL,” it adds.
UBL says it is considering the proposal.
There is no sign that UBL is struggling financially. Uganda Breweries Limited, established in 1946, has been a consistent contributor to the growth of Uganda’s economy as reflected in the company always being among the top taxpayers.
The URA Annual Revenue Performance Report FY 2019/20 says UBL was sixth in VAT contribution, with a 31.68 per cent growth over the previous year; UBL was fourth of contributors to Local Excise Duty (LED) collections; and it was one of the three that made positive growth in that contribution- the rest made declines.
UBL injects Shs20 billion annually into farming communities and value chains to access locally grown materials for its production/brewing operations.
EABL is the holding company for Kenya Breweries Limited (KBL), Uganda Breweries Limited (UBL) and Serengeti Breweries Limited (SBL) as well as other subsidiaries in East Africa.
In January, EABL shared its financial results for the last six months of 2023. The scorecard showed mixed performance. While the company’s revenue grew, profits took a hit due to rising costs and other challenges. The giant brewer saw its gross revenue increase by nearly 14 percent, reaching Shs3.4 trillion.
