Even as Vijay Mallya and Diageo are engaged in protracted discussions with the Indian regulators to get the nod for the $2.1 billion deal in which Diageo may acquire up to 53% stake in United Spirits, Diageo is moving ahead with another transaction with Vijay Mallya in South Africa.
Diageo has announced that it has entered into an agreement to acquire a 50% interest in the company which owns United National Breweries’ traditional sorghum beer business in South Africa. The remaining 50 per cent will be held by a company affiliated to Mallya. Diageo will acquire its 50% interest for $36 million (approximately £23 million), subject to customary adjustments.
The transaction is conditional on (among other things) consent from the South African competition authority and is expected to complete in the first half of this year. This move by Diageo is subsequent to the MoU which was announced during early November under which they would form a 50:50 joint venture, which would own United National Breweries’ traditional sorghum beer business in South Africa. This transaction was part of the multi-layered deal which Vijay Mallya struck with Diageo during early November 2012.
United National Breweries, is among the leading manufacturers of traditional African Sorghum Beer (Umqombothi) in South Africa. Umqombothi is the core business of UNB. It produces and distributes Umqombothi from six breweries and numerous distribution depots strategically situated throughout South Africa.
Vijay Mallya had acquired this company during 1996 through a global tender and has been involved in taking the company out of the financial difficulties it was under. It has a rich and varied history and started out as scattered breweries under the control of various Development boards, Municipalities and Management boards. Decades earlier, various breweries that brewed for the local consumers in the municipalities and development areas were amalgamated by directive of the Government.
According to United National Breweries, this later gave rise to one of the first economic empowerment companies in South Africa under the name of National Sorghum Breweries (NSB). Although the formation of this group was huge step forward for the traditional beer industry in South Africa the transition was not seamless and NSB ran into financial trouble. A global tender was advertised for investment and management assistance and the UB Group of India became stakeholders in 1996. It also managed to take over the business of the traditional beer subsidiary of SAB, TBI in 2000.
“The nature of traditional beer in that it is an actively fermenting product with a very limited shelf life that necessitates on-the-ground and hands-on management requiring a decentralized operational base. UNB operates in this decentralised fashion with centralised strategic, financial and corporate controls,” the company added.
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Highlights
| Preserving and promoting a true African heritage product in the market place made according to the ethos of the traditional brewers of Africa |
| Initiating an Umqomboti Renaissance where African Traditional Beer is given the support and respect it deserves |
| Turning around a company with financial difficulties into a profitable entity providing stable employment to many and sustainable business opportunities for tens of thousands of traders |
| Sustaining and reviving a perceived ‘sunset’ industry |
| Uniting many stakeholders from diverse backgrounds into a singular and dynamic team |