Corporate News
EABL Group managing director Charles Ireland. PHOTO | FILE
By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com
In Summary
- EABL says it will transfer all its shares in Central Glass Industries—its 28-year-old subsidiary from which it sources beer and spirits bottles— to Johannesburg-based Consol Glass.
East African Breweries Limited (EABL)
is set to earn billions of shillings from the sale of its long-standing
glass business to a South African company, in a transaction which
analysts say is meant to help reduce the brewer’s debts.
The brewer said it will transfer all its shares in Central
Glass Industries—its 28-year-old subsidiary from which it sources beer
and spirits bottles— to Johannesburg-based Consol Glass.
Analysts say the move could be aimed at reducing an
expensive outstanding loan of over $200 million (Sh18.4 billion) that
the brewer received from its parent company Diageo in 2011.
“After a thorough strategic review, we have made
the decision to exit the glass business in order to focus on our core
business and un-lock additional value for our shareholders,” said
Charles Ireland, the EABL managing director.
EABL took the Diageo loan to buy back a 20 per cent
stake in Kenya Breweries Limited which it had earlier sold to its
partner-turned-rival SABMiller.
The loan, on which the brewer said it pays an interest of over 12 per cent, could have seen it make the decision to sell it off.
“The most plausible explanation for the sale is
that EABL looked at its assets and determined which ones they could sell
to improve their debt position,” Eric Musau, an analyst with Standard
Investment Bank (SIB) told the Business Daily.
“The proceeds of this sale will most likely go towards reducing the debt from Diageo,” he said.
Consol Glass is a privately-owned company (its
major shareholder is an equity investment fund called Brait) and is
currently the leading glass packaging manufacturer in Southern Africa.
The company has four factories in South Africa and recently bought a stake in a Nigerian glass manufacturer, Glassforce.
EABL said the deal, whose value has not been made
public, could be complete in the next two months subject to regulatory
and shareholder approval.
Consol has been supplying glass to EABL spirits subsidiary United Distillers Vintners (UDV) for several years.
“This transaction is a win-win for all parties
including employees who will all be absorbed under the current terms and
conditions of employment”, Consol’s chief executive officer Mike Arnold
said in a statement.
Consol’s entry into Kenya will expose them to new
customers including Pepsi and Coca-Cola —CGI’s present clientele— and
new ones like Keroche Breweries which this week scaled up its output
capacity 10 times.
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