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More takes on the Heineken-Distell waltz

Only months after cancelling investment in SA, the world’s second-largest brewer, Heineken, is in talks to buy SA drinks producer Distell, its main cider competitor and the country’s largest non-brewing player.

The world’s largest cider producer has approached Distell, owner of Hunter’s Dry and Savanna, about buying a majority of the company in a deal that could bring in about R33bn and bulk up Heineken’s presence in Africa. 

The potential deal comes as global brewing companies Carslberg, AB InBev and Heineken compete for a share of emerging markets, and after a year in which pandemic-related lockdown restrictions and bar closures worldwide led to plummeting liquor sales.        

Dutch-based Heineken has been embarking on a “beyond beer” strategy to broaden its drinks portfolio and has been buying cider producers in Australia and launching alcoholic flavoured waters as some consumers in the US move away from beer.  

If it takes place, the deal will entrench Heineken’s position in a market that is increasing hostile towards alcohol companies, with SA the world’s only country to enact 19 weeks of alcohol bans in response to the coronavirus and one that has instituted decades of above-inflation increases in sin taxes.  

Health experts have proposed legislation that would ban the consumption of any alcohol before driving, and have proposed instituting minimum prices for alcohol to eliminate the supply of very cheap booze.  

Heineken is not unaware of the tricky trading environment in SA, and in 2020 it joined SAB and glassmaker Consol in canning its planned investment in increased production capacity in response to the liquor sales ban before announcing that it planned to cut 70 jobs in the country in January.

However, Keith McLachlan, an analyst at Integral Asset Management, said while the environment would not add to the attraction of the deal, the “economics of bundling the world’s two largest cider producers together is likely [to be] more attractive than many variables counting against the deal”….. Read the full article

Heineken’s bid is a wake-up call

We’ve become so used to looking obsessively at our faults that we often forget that SA companies remain of global interest, comments a BusinessLive editorial.

The country might be addled by shoddy service delivery, but recent approaches by international companies Volaris and Heineken, for control of technology group Adapt IT and drinks group Distell respectively, indicates the high esteem in which SA’s private sector is held globally.

In Heineken’s case, its desire to buy the “majority” of Distell is especially curious — the €57bn group was badly hurt by last year’s alcohol bans. Heineken, which sells its eponymous beer here, along with Windhoek and Strongbow cider, was forced to ice a R6bn brewery in SA, given its Covid-linked losses.

Now, however, it sees Distell as a route to the African market. But whether Heineken’s bid gets the nod is far from certain, as Distell’s two largest shareholders, Remgro (which owns 31.8%) and the Public Investment Corp (which owns 31.7%) won’t want to let go except for a steep premium.

Still, these bids provide a lesson for those of us inclined to be so overly pessimistic on SA’s prospects that it obscures our view of the value under our noses.

Notwithstanding the post-Covid recovery, many SA Inc stocks remain a bargain — even if our in-built scepticism often prevents us from seeing this.