Japan's Asahi Holdings has agreed to buy out Diageo's 65 percent stake in the East African Breweries Limited (EABL) in a deal valued at KES296.4 billion ($2.3 billion).

The transaction, which is set to be sealed the second half of next year, will see London Stock Exchange-listed Diageo divest its last remaining direct interests in a beer business in Africa. Additionally, the entry of Japan's Asahi Holdings will mark the largest investment by a Japanese beer maker in the continent. 

“The new majority owner brings significant knowledge and expertise in innovation and growing successful brands globally," said Jane Karuku, MD and CEO of EABL.

Following the announcement on Wednesday morning, the Nairobi Securities Exchange halted the trading of EABL shares until the next trading day [Thursday].

According to Asahi Group, the firm is banking on "borrowings from financial institutions or cash on hand" to finance the new acquisition. "There are currently no plans of issuing new shares in Asahi," the Group stated.

The transaction will see Asahi become majority owners of one of East Africa’s leading businesses, assuming control of all operations in Kenya, Uganda and Tanzania.

The Japanese firm will preserve local brands while introducing globally recognized names from its portfolio to consumers in East Africa, EABL said in a statement.

Under the deal, EABL said its iconic Tusker beer brand, which was named after an elephant that injured one of the brewers' founders during a hunting exercise in 1923, will be retained.

According to Diageo, there will be refreshed agreements for EABL to produce certain spirits such as Smirnoff, Captain Morgan and ready-to-drink brands Smirnoff Ice and Orijin, as well as Guinness brand under licence and the import and distribution of Diageo international premium spirits.

"This transaction delivers both significant value for Diageo shareholders and accelerates our commitment to strengthen our balance sheet. We remain committed to returning the Group to well within our target leverage ratio range of 2.5 - 3.0x through disposals of non-strategic, non-core assets, alongside delivering positive operating leverage, and tighter capital discipline. This disposal, alongside the recent announcement by USL1 to conduct a strategic review of its ownership of RCB2, represent material steps in delivering on this commitment," explained Nik Jhangiani Interim CEO of Diageo.

Atsushi Katsuki, President and Group CEO of Asahi added: “This business is a high-quality, leading company in Kenya, Uganda, and Tanzania, with an unrivalled brand portfolio and marketing capabilities, state-of-the-art production facilities and strong market shares. Together with its excellent management team and employees, we will pursue sustainable growth and medium- to long-term enhancement of corporate value, while contributing to the development of the local economies.”

Diageo, which is the world’s largest spirits group, has been struggling with tariff hikes in its key U.S. market, huge debt levels, and worrying market trends that some younger consumers are shifting away from drinking alcohol.

Established in 1889, Asahi has presence across Japan, East Asia, Europe, and Asia Pacific trading in premium beer brands Asahi Super Dry, Peroni Nastro Azzurro, Kozel, Pilsner Urquell, and Grolsch. The brewer is listed on the Tokyo Stock Exchange.

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