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Markets cheer the potential purchase of Distell by Heineken

Distell’s share price leapt by more than 10 percent on the JSE yesterday morning after it announced that it had been approached by brewer behemoth Heineken for a potential acquisition of its majority business. Picture Courtney Africa/African News Agency(ANA)

Distell’s share price leapt by more than 10 percent on the JSE yesterday morning after it announced that it had been approached by brewer behemoth Heineken for a potential acquisition of its majority business. Picture Courtney Africa/African News Agency(ANA)

Published May 19, 2021

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DURBAN - DISTELL’S share price leapt by more than 10 percent on the JSE yesterday morning after it announced that it had been approached by brewer behemoth Heineken for a potential acquisition of its majority business.

Distell is Africa’s leading producer of wines, spirits, ciders and other ready-to-drink beverages and is the maker of Savanna, Hunter’s Dry, Three Ships and Amarula. Heineken is the second largest brewer in the world, with more than 300 brands, and it operates in more than 190 countries.

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Distell said the companies had entered into discussions which, if successfully concluded, might have an effect on the price of its securities.

“Bearing in mind that there can be no certainty that an agreement will be reached, shareholders are advised to exercise caution when dealing in their Distell securities until a further announcement is made,” Distell said.

In the six months to end December, Distell reported a 3.8 percent increase in revenue to R15.4bn, with volumes up by 0.8 percent and headline earnings per share increased by 11.6 percent.

Distell’s share price cheered the potential acquisition as it rose to a one-year high of R158 a share on the JSE, up from Monday’s closing price of R143.06. It shed some of the gains in the afternoon, but was still trading 4.51 percent higher at R149.51. The share closed the day 5.03 percent higher at R150.26.

Stephen Meintjes, the head of research at Momentum Securities, said it was too early to tell whether the talks will lead to the companies eventually entering into a transaction.

“However, Heineken’s new chief executive, Dolf van den Brink, said in the annual report that ’we can do more to stretch and grow and go beyond beer with new drinks’. Distell would at one stroke give Heineken an established portfolio of a wide variety of non-beer ‘new drinks’,” Meintjes said.

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He added that it would remain to be seen whether Remgro, with 31.4 percent stake and the Public Investment Corporation with 30.1 percent stake would like to cede control of a South African champion with ambitions to grow into Africa would be another matter.

“Distell comprised 7 percent of Remgro’s intrinsic net asset value at the end of December 2020, so although it is a meaningful part of its consumer goods investments, it is not critical. The PIC might be more inclined to take the longer-term South African champion stance. A hefty SABMiller-type premium might be required to get them to agree,” he said.

He added volumes had risen substantially recently and yesterday’s action, up 4.5 percent, would appear to be due to the announcement as a reason for the share price gain.

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Nesan Nair, a senior portfolio manager at Sasfin Securities, said the share price was potentially boosted by the news of the acquisition.

“It is very likely that a deal will take place as Heineken needs scale and diversification and Distell has both,” he said.

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