Subscriber login Close [x]
remember me
You are not logged in.

Diageo acquires control of South African beer business, United National Breweries.

Published:  02 April, 2015

Diageo has acquired control of South African beer business United National Breweries, after snapping up the remaining 50% of the business.

The deal will see the drinks giant take on the 50% of the company owned by Pestello Investments Inc for around £14.8m ($22m) with a potential earn-out payment of up to £9.4m (or $14m). Pestello is a company affiliated to Vijay Mallya.

The transaction is conditional on consent from the South African competition authorities but Diageo said it was expected to complete during this fiscal year.

The company bought a stake in UNB in January 2013 for approximately £23m ($36m) as part of a joint-venture with Mallya, agreed in November 2012, with 50% being owned by Pestello.

United National Breweries is a leading manufacturer of traditional South African sorghum beer and comprises six breweries and numerous distribution depots across South Africa. Its beer brands include Chibuku, iJuba special and iJuba blue and Joburg beer.

A statement issued from Diageo said: "Once completed, this transaction will give Diageo control of the leading traditional sorghum beer business in South Africa, including the ability to make investment decisions to support the continued growth of United National Breweries' brands in the sorghum beer category."

In a president's call last week, (25 March) Andy Fennell, President and Chief Operating Officer Diageo Africa said Africa had "incredibly attractive fundamentals" for alcohol companies due to its macroeconomic potential, favourable demographics are favourable and the opportunity to bring consumers into "formal" alcohol. It said Diageo's strength in Africa lay in the scale of its beer business which was complemented by its spirits and it was keen to grow its business across a range of price points, across beer, spirits and RTD.

"We will do that by expanding our route to consumer, bringing Diageo's innovation capabilities to bear, tightly managing our cost base and continuing to improve our local manufacturing capabilities, particularly in spirits, and expanding into new markets," he said. "We will continue to build on our local talent to drive this growth which we believe will return to high single digit to low double digit growth over the medium to long term with some margin expansion over time."