South Africa approves Heineken’s takeover of Distell – with conditions

South Africa’s Competition Commission approved Heineken’s purchase of wine and cider company Distell Group – as long as the merged entity invests more than R10 billion over five years in the country.

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According to Reuters, the commission said the investment would be to maintain and grow the aggregate productive capacity of its operations and related facilities in South Africa.

Distell Group owns brands such as Hunters Dry, Savanna, Klip Drift, JC Le Roux and Amarula – among others.

For the transaction to have been approved, Heineken agreed to divest its cider brand Strongbow in South Africa and other countries subject to the South African Customers Union.

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Heineken launched Strongbow (a cider brand) in South Africa in 2016 and manufactured and supplies several South African craft beer brands, including Jack Black and Stellenbrau.

In Mzansi, Heineken Group also operates the Sedibeng brewery, producing a range of beers, including, amongst others, Heineken, Amstel, and Windhoek.

The Dutch brewer announced in November its planned purchase of Distell and Namibia Breweries Ltd to form a southern African drinks group worth $4 billion.

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The commission recommended that the Competition Tribunal, which makes the final decision, approve the merger subject to conditions.

This is because it found that the proposed transaction is likely to substantially prevent or lessen competition in the relevant markets as the merged entity will be a dominant supplier of flavoured alcoholic beverages, with a market share above 65% and would be the largest supplier of ciders in South Africa.

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“To address the competition concerns arising from the transaction, Heineken has committed to divest its Strongbow business in South Africa and other SACU (Southern African Customs Union) countries,” the commission said.

The commission and the merging parties also agreed to implement an Employee Share Ownership Scheme that will transfer more than 3 billion rand of equity to workers of the merged entity’s South African operations.

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Other investments include establishing a R400 million supplier development fund to invest in small businesses, a R200 million contribution to promote localisation and growth initiatives within the country and an innovation, research and development hub for the Africa region based in South Africa.

To address employment concerns in South Africa, the merging parties have agreed to maintain employee headcount for a period of five years following the merger and not to retrench any employees below specified managerial grades, it added.

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