South Africa: SABMiller plans to sell brewery stakes to black investors

01 July, 2009

SABMiller has announced plans sell 10% of its subsidiary South African Breweries to black investors.

The ‘broad-based black economic empowerment transaction’ will involve an equity issue of approximately 10% of its South African subsidiary, The South African Breweries (SAB), to a broad base of black participants. SABMiller said this reflects the ‘group’s long-standing commitment to socio-economic progress in South African society’.

The equity interest is valued at US$750 million (R6 billion) and participants will include SAB’s employees; black-owned licensed liquor retailers and liquor licence applicants, as well as black-owned customers of ABI, the soft drinks division of SAB; and the broader South African community through an SAB foundation.

The transaction will not require any external bank funding, and will require only a small cash investment by licensed liquor retailers, liquor licence applicants and customers of ABI; meaningful cash dividends are expected to be paid to participants from the first year.

At the end of the ten year transaction period, participants will exchange their shareholdings in SAB for shares in SABMiller. The economic cost of the transaction to SABMiller, based on SABMiller’s current assumptions and on market conditions as at Friday, 26 June 2009, is calculated at approximately US$220 million (R1.8 billion).

The transaction will materially enhance SAB’s compliance with the South African Government’s Codes of Good Practice on Black Economic Empowerment and, in addition, seeks to support the normalisation of the South African liquor industry.

Graham Mackay, Chief Executive of SABMiller plc, said:

“We have structured this transaction to maximise benefits for all our stakeholders and to deliver genuine broad-based black economic empowerment.

"There are three innovative and distinctive features of this transaction. Firstly, the transaction places no reliance on external bank funding, and requires only a relatively small and hence affordable cash investment from retail participants. Secondly, a meaningful dividend stream is expected to be paid to all participants for the whole of the ten-year transaction period, thereby delivering a significant economic benefit from the first year.  Thirdly, the transaction aims to benefit the stakeholders who have made a real contribution to SAB’s success as well as the broader South African community through the SAB Foundation.”

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