Minority shareholders in Uganda’s EABL subsidiary Uganda Breweries Limited (UBL) are set to receive a windfall of up to 34 times their historical investment in the company when they sell their 1.81 percent stake to EABL through a tender that opened a week ago.
Files in EABL’s 2024 annual report show that UBL’s historical book value stands at Sh687.65 million.
Separately, the report shows that the Uganda unit, along with East African Beverages (South Sudan) Limited, has net assets of Sh10.2 billion as of June 2024.
EABL, which owns 98.19% of the Ugandan beer company, said in a notice last week it would buy the remaining stake, or 2.18 million shares, at 5,630 Ugandan shillings ($195.42) each. The offer price values the Ugandan unit at about 23.51 billion shillings.
The premium takes into account the growth of the business’s asset base over the years, with EABL stating that the valuation also takes into account current and future expected earnings, market value of assets, earnings and growth potential as well as the value of intangible assets.
The company said it has contracted the services of an independent evaluator to determine the best estimate of the deal price.
UBL is not listed on a stock exchange and hence does not have the benefit of the market-determined price discovery process.
“Consequently, the book value of paid-up capital will not be used to determine the sale price of the shares. To this end, an independent valuation of UBL has been conducted to determine the market value of the company,” EABL said in a statement.
The purchase offer value is based on an independent valuer’s best estimate of what a willing buyer and willing seller would agree to in an open market.
“EABL has carried out appropriate due diligence to arrive at the optimum price offered to minority shareholders and is therefore offering a fair price for the shares.”
EABL said in its offer notice earlier that the offer would be made on a buyer-seller basis, without any element of pressure on shareholders who did not wish to sell.
The offer runs until March 3, 2025, and is open to UBL shareholders who were on the books as of September 2.
UBL is one of four EABL subsidiaries – out of a total of 12 – in which the company does not own 100 percent.
Other companies with partial ownership include Serengeti Breweries Limited in Tanzania (92.5 per cent), UDV (Kenya) Limited (46 per cent), and East African Beverages (South Sudan) Limited (99 per cent).
In its bid to buy the minority stake in UBL through a tender offer, EABL follows in the footsteps of its British parent company Diageo, which bought an additional 14.97% stake in the company through a similar scheme in March last year.
Digio, which executed the acquisition through its wholly owned subsidiary Digio Kenya, saw its stake rise from 50.03 per cent to 65 per cent after purchasing an additional 118.4 million shares in the company at a cost of Sh192 per unit, valuing the deal at Sh22.7 billion.