Heineken and Distell’s R40.1bn merger has been given the go-ahead by the Competition Tribunal almost 18 months after the tie-up was announced.
This will see Distell delisting from the JSE, with shares suspended from trade from March 22.
In November 2021, Heineken offered R180 for Distell shares in two parts of the business. The talks about the deal were announced in May that year.
The offer comes at a time South Africa has been struggling to attract foreign investment.
The parties say the deal will create a brewing giant better able to compete with SAB, part of world’s largest brewer, AB InBev.
The tribunal updated its website on Thursday just after midday to say the deal had been approved with conditions. It is still to publish details of the conditions.
Distell said in a JSE stock filing announcement that the conditions “align broadly” with those proposed by the Competition Commission.
Heineken had offered to invest R10bn over five years and set up an employee share ownership scheme that will transfer more than R3bn in equity to workers.
It planned to invest R175m in a tavern transformation programme and invest R400m in a supplier development fund.
Because Heineken is buying the two biggest cider brands locally, Savanna and Hunter’s Dry, the brewing company had offered to sell its Strongbow brand in South Africa, Lesotho, Botswana, Namibia and Eswatini to ensure it does not own all three brands.
The Competition Commission, one of three bodies established to regulate competition between firms and which gives its vote of approval or disapproval to the Competition Tribunal, had said the sale has to be conducted “in a manner that promotes transformation”.
Rival SAB intervened during the tribunal hearings, saying it was unhappy that Heineken would sell Strongbow and that it wanted Distell to sell the Hunter’s brand instead — and was interested in buying it.
SAB also raised concerns about the proposed joint buyer of the local Strongbow licence, Devil’s Peak and a BEE consortium.
Heineken testified that if it was forced to sell Hunters, the deal would be off, with its advocate arguing SAB was being opportunistic.
Asset manager Ninety One, which was a shareholder in Distell at the time of the proposed deal, has said the acquisition price is too low.
All Weather Capital’s chief investment officer (CIO), Shane Watkins, said last week that Distell shareholders had lost out not only because of the price but also because of the time the deal has taken.
“The original offer was far too low, and because of the time value of money, what shareholders eventually receive will be even less in real money terms.”
The merger will split Distell into two units. One will contain the cider, spirits and wine business and will be combined with Heineken’s interests in Southern Africa, including Namibia, into a company called Newco. The European brewer is paying R165 a share for that business.
Heineken will hold a minimum of 65% in Newco and the rest will be held by Distell shareholders who elect to reinvest while there will also be a minimum 15% BEE shareholding.
Distell’s Scotch whisky business will be housed in a Distell subsidiary, Capevin. JSE-listed Remgro, the majority owner of Distell, will hold a majority stake. Shareholders who sell their stake in the whisky business, whose brands include Scottish Leader and Bunnahabhain, will receive R15 a share.
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