This archive report was first published on 11 September 2019.
Published on September 11, 2019, a debt conversion deal between East African Breweries Limited (EABL) and Serengeti Breweries is set to see non-controlling shareholders pump in an additional KSh3.2 billion capital into the company.
The deal, which was entered in June 2018, saw Serengeti Breweries' Ksh15.3 billion debt converted to equity by EABL, easing the company's debt burden in the process. As a result, EABL's stakes rose to 72.5 percent, up from an initial 51 percent ownership in the Tanzanian brewer.
However, Tanzanian authorities had previously opposed EABL's increased ownership in Serengeti and forced it to pay an unspecified fine to settle alleged flouting of takeover rules.
Under the deal, the non-controlling shareholders of Serengeti will pay the company KSh3.2 billion from 50% of their dividends received from Serengeti, after which EABL's ownership stake will go back to 51%.
Minority shareholders made an initial payment of KSh16 million in the year ended June.
According to EABL's latest annual report, the company entered into an agreement with the non-controlling shareholders of its subsidiary, Serengeti Breweries Limited (SBL), to convert all its outstanding loans receivable to the subsidiary into equity shares, without proportionate capital contribution by the non-controlling shareholders, on July 1, 2017.
It is worth noting that Serengeti's minority shareholders could restore their original 49 percent stake in the future by ceding half of their dividend entitlement.
Serengeti Breweries Limited is the second-largest beer producer in Tanzania, with its own brands taking 15 percent of the market by volume and when combined with EABL's portfolio, accounts for approximately 28 percent of the Tanzanian branded beer sector.
The company has three operating plants; the Dar es Salaam plant has a production capacity of 35 million liters, the Mwanza plant 65 million liters while the facility in Moshi has a production capacity of 50 million liters expandable to 80 million liters.
