Diageo UK, through its wholly-owned indirect subsidiary Diageo Kenya, announced that it had successfully completed the partial tender offer to acquire an additional 15.0 percent stake in East African Breweries Plc (EABL).
Prior to the tender offer, Diageo Kenya PLC held 395.6 million shares out of the total 790.8 million outstanding shares, equivalent to 50.0 percent of the entire shareholding.
The tender offer comprised two phases with Diageo Kenya receiving valid tenders from 1,697 shareholders amounting to a total of 143.5 mn Ordinary Shares.
This translated to an oversubscription rate of 121.2 percent with Diageo Kenya accepting the maximum 118.4 million Ordinary Shares, as specified in the tender offer.
Following the completion of the Tender Offer, Diageo Kenya now holds the largest stake in EABL at 65.0 percent with 514.0 million shares, which includes the 118.4 million Ordinary Shares that Diageo Kenya accepted to purchase and 395.6 million Ordinary Shares it owned prior to commencement of the Tender Offer.
Key to note, Diageo purchased each share at Kshs 192.0, which represented a 39.1 percent premium on the EABL’s stock price of 138.0 shillings a day before the announcement of the tender offer.
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As such, we expected EABL’s stock price to rally as investors sell their stake at a premium, however, the tender closed when the stock was trading at 170.5 shillings per share, 11.2 percent below the offer price of 192.0 shillings per share.
The move by Diageo Kenya to increase its shareholding in EABL affirms the importance of EABL to the larger group and confidence in its future growth despite the challenging macroeconomic environment occasioned by elevated inflationary pressures as well as the government’s decision to increase excise taxes.
Notably, EABL has continued to display strong financial performance as evidenced by the EABL’s Profit After Tax of 15.6 billion shillings and 8.7 billion shillings in FY’2022 and H1’2023, respectively.
Additionally, Earnings per share increased by 172.2 percent to 15.0 shillings in FY’2022, from 5.5 shillings in FY’2021, and a 2.1 percent increase in earnings per share to 17.3 shillingsH1’2023, from 16.9 percent in H1’2022.
Further, the EABL board of directors announced a total of Kshs 11.0 dividend per share in FY’2022, translating to a dividend yield of 6.4 percent, and lately recommended an interim dividend of Kshs 3.75 in H1’2023.
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