East African Breweries Plc (EABL) on Thursday defended the recent acquisition of an additional 14.97 percent stake in the company by its parent firm Diageo Plc.
Appearing before the Senate Trade Committee on Thursday, EABL’s chief executive Ms Jane Karuku said the transaction which raised Diageo’s ownership in the company to 65 percent was above board.
Her appearance followed a petition filed in the Senate by Rono Nicholas sponsored by Bomet Senator Hillary Sigei over alleged fraudulent activities within EABL.
Read: EABL takes Sh14bn loans for capital projects
The EABL boss downplayed the petitioner’s allegations that the recent shareholding acquisition by Diageo is a fraud claiming the shares were acquired for onward transfer to a new buyer at a much higher value for the benefit of Diageo shareholders.
The petitioner alleged that the onward sale of the shares that had been agreed with Heineken/Castel Group with the purchase of the additional shares was to allegedly assure Heineken/Castel Group of a controlling stake in EABL after the onward sale.
But Ms Karuku told the committee there is no evidence to substantiate the wild claims made by the petitioner, asking the committee to treat the petition as a false allegation.
“As part of its disclosures in the 2023 public tender offer, Diageo Kenya disclosed that it had made no agreement or arrangement to sell EABL shares to any other person. Our position is that the petition lacks credibility and has no legal or solid grounds,” she said.
Diageo bought a total of 118.4 million EABL shares at a cost of Sh192 per unit, placing the total purchase price at Sh22.7 billion.
The deal was done through a tender offer where existing shareholders of the Nairobi Securities Exchange-listed firm were invited to sell their holdings at the offer price.
Uasin Gishu Senator Jackson Mandago raised concern over Diageo’s recent moves to sell some of its beer business in the African market to Castel Group, citing Cameroon, South Africa, Namibia and Ethiopia.
The MP sought assurances from Ms Karuku that recent Diageo deals in Africa do not mean that the brewing giant has little interest in beer and is more focused on the spirit business.
“The petitioner was informed by this trend of buying shares and later selling. Was it a mistake to have Diageo on board as an investor? Can we confirm that Diageo has no intention to sell its shares later to another person?” posed Mr Mandago.
Ms Karuku told the committee that EABL, the largest manufacturing plant in sub-Saharan Africa, is a gem to Diageo, adding that the UK firm has no plans to offload its shares.
“We have no information that they are going to sell their shares to another person. The rate at which they are investing in the country does not show they will be selling to anyone. The investment is a signature and a signal that we are a gem to them,” said Ms Karuku.
Read: EABL bosses get Sh155m Diageo shares
Busia Senator Okiya Omtatah, took the EABL boss to task, arguing that there is no clause in law that will prevent Diageo from selling its shares.
The transaction raised Diageo’s stake in the Kenyan brewer from the previous 50.03 percent. Besides the onward sale, the petitioner made several other adverse allegations against EABL including tax evasion. BY BUSINESS DAILY