Kenya’s East African Breweries Ltd (EABL) has said it would try to convince Tanzanian authorities not to revoke its acquisition of a controlling stake in Tanzania’s second-largest brewery.
Tanzania’s Fair Competition Commission (FCC) said early this month that it wants to revoke EABL’s 51 percent stake in Serengeti Breweries, acquired five years ago, accusing the Kenyan company of not meeting some unspecified conditions.
EABL, which is controlled by Britain’s Diageo, paid $60 million for its stake in Serengeti, giving it a 28 percent share in a market offering high growth potential.
But the FCC has accused EABL of not making good on pledges made when it obtained permission for the deal. EABL has denied the accusation.
The FCC said in a statement on June 29 an investigation into the merger revealed that the “performance of SBL was not as per expectations of the Commission.”
It said it had approved the merger in 2010 under the condition that EABL would enable Serengeti to achieve “potential growth that is well beyond the level it was able to achieve previously.”
Charles Ireland, EABL’s chief executive,has said at a news conference last week to announce the brewer’s annual results that he would meet FCC officials this week in Tanzania.
“The FCC has expressed disappointment in the performance of the business and has called us to explain why the business has not been performing to expectations,” Ireland said.
“I think probably they need reassurance that we are committed to Tanzania, and we are going to be making investments in Tanzania and ultimately we are going to be successful.”
EABL reported a 36 percent rise in pretax profit to 14.15 billion shillings ($139 million) in the year to end-June, boosted by higher sales, which sent its shares rising.
Revenues were up six percent to 64.42 billion shillings, the brewer said, with sales rising by 2 to 7 percent in Uganda, Kenya and Tanzania and exports to other markets jumping by 48 percent.