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Diageo officially announced it has agreed to sell its majority stake in East African Breweries PLC (EABL) and its spirits business, UDV Kenya (UDVK), to Japan’s Asahi Group Holdings for an estimated net proceeds of $2.3 billion.
The London-listed owner of brands including Johnnie Walker and Smirnoff will sell its 65 per cent stake in East African Breweries Limited (EABL) to Japan’s largest brewer and keep a foothold in the market through a licensing agreement with EABL.
The deal values EABL at $4.8bn and will reduce Diageo’s debt by a net debt to earnings ratio of 0.25 times.
The company’s debt is currently above its target range of 2.5-3 times.
In the 12 months to June, EABL reported net sales of $996mn, and net debt at $229mn.
Earlier this year Nik Jhangiani, Diageo’s interim chief executive said the company was planning significant divestments to help reduce its debt burden.
The drinks maker has been hit by falling alcohol demand and US President Donald Trump’s trade tariffs.
In a statement on Wednesday, Jhangiani said: “This transaction delivers both significant value for Diageo shareholders and accelerates our commitment to strengthen our balance sheet.”
Asahi said in a statement that it expected EABL to remain listed on the Kenya, Uganda and Tanzania stock exchanges once the deal is complete.
Asahi said that the deal would give it “a leading platform in Kenya and the east African market, which is expected to deliver long-term growth driven by population increase and economic expansion”.
The company added that the business had “a rich brand portfolio, including beer brands such as Senator, Chrome and Kenya Cane”.
The companies also planned to enter into long-term licences for Diageo’s global brands, such as Guinness and Smirnoff Ice, the Japanese group said in its statement.
The previously state-owned EABL is the largest drinks player in Kenya, holding approximately 80 per cent share of the country’s alcohol market.
The company brews local beers such as Tusker and Serengeti for its core markets in Kenya, Uganda and Tanzania, as well as distributing Diageo spirit brands across the region.
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