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Heineken gains approval to buy Distell

South Africa’s Competition Commission has approved Heineken’s takeover of Distell if it meets certain conditions.

Amarula Distell
Distell’s Amarula liqueur brand will be sold to Heineken

Last November, brewing giant Heineken agreed to buy a 65% stake in South African drinks group Distell for €2.2 billion (US$2.5bn), excluding the Scotch whisky business.

Heineken agreed to purchase Distell’s flavoured alcohol beverages (FABs), and wine and spirits operations, with the exception of certain spirit brands, as well as Namibian Breweries.

The Distell brands that will be excluded from the Heineken deal include Scotch whisky brands Black Bottle, Bunnahabhain, Deanston, Scottish Leader and Burn McKenzie, as well as gin brands Gordon’s and Tobermory.

South Africa’s competition regulator has now recommended that the Competition Tribunal approve the merger subject to conditions.

The Commission found that the agreement would likely prevent or lessen competition in the FABs and cider market as the merged company will be a dominant supplier of FABs, with a market share above 65%, and would be the largest supplier of ciders in the country.

As such, Heineken has agreed to sell its Strongbow cider business in South Africa to address the competition concern.

The merged group also must agree to invest more than R10bn rand (US$585.2 million) over a five-year period to maintain and grow the production capacity of its operations and related facilities in South Africa.

Furthermore, it must implement an employee share ownership scheme, establish a R400m rand (US$23.4m) supplier development fund, and donate R200m (US$11.7m) to promote local initiatives in the country.

Other conditions include investing R175m (US$10.2m) in a tavern transformation programme, and the creation of a South Africa-based innovation, research and development hub within five years.

Furthermore, the Competition Commission said the combined company has agreed to maintain its current total employee headcount for five years after the merger.

Proposed deal

Dutch firm Heineken and Amarula liqueur owner Distell first entered into discussions over a potential takeover deal in May 2021.

The transaction would mean an internal restructure of Distell to create two new businesses: Newco and Capevin.

Newco will combine Distell’s portfolio of spirits, wine, cider and ready-to-drink beverages with Heineken’s Southern Africa and export markets business.

Capevin will include the company’s remaining assets, including its Scotch whisky business.

As part of the agreement, Heineken will own a minimum 65% stake in Newco, while Distell’s largest shareholder Remgro will retain control of Capevin.

In August, Distell saw revenue rise by 20.8% for fiscal 2022, led by its single malt portfolio and Amarula liqueur.

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