Nigerian Breweries on track to seal Distell Wines & Spirits deal by H1 2024

Onome Amuge

Nigerian Breweries Plc has confirmed that the final leg of its highly anticipated acquisition of an 80 per cent stake in Distell Wines & Spirits Nigeria Limited will be concluded during the first half of 2024, falling between the months of April and June.

The development, poised to cement the company’s strategic foothold in the high-potential wine and spirits market, is the culmination of a thorough process that began with shareholders’ approval of the acquisition in December 2023, setting the stage for a momentous expansion into one of the most promising segments of the Nigerian beverage industry.

Battling against the forces of foreign exchange scarcity and a volatile macroeconomic landscape, Nigeria’s oldest and largest brewing company, has shouldered the weight of an unrelenting 2023, reeling from a devastating N153bn forex loss as the country’s currency suffered devaluation.

In light of the ongoing economic challenges, Nigerian Breweries is betting on strategic cost-saving measures, as the company looks to streamline its operations and optimise its resources.

The strategic shift,which includes the planned acquisition of Distell Wines & Spirits Nigeria Limited,is viewed as a prudent response to the domino effect of the Nigerian economy’s double-digit inflation, currency devaluation, and contracting consumer spending, offering Nigerian Breweries a potential path towards increasing efficiency, enhancing profitability, and safeguarding its business in uncertain times.

Hans Essaadi, the managing director/chief executive officer of Nigerian Breweries Plc, recently made a candid revelation in a pre-AGM media briefing in Lagos,announcing a strategic company-wide reorganisation as part of its strategic recovery plan. Amidst revelations of two of the nine Nigerian Breweries’ operations being shuttered, Essaadi affirmed the move as a decisive step towards optimising cost management and bolstering the firm’s resiliency in the face of economic headwinds.

Commenting on the 80 per cent acquisition stake in Distell Wines & Spirits Nigeria Limited, Essaadi said: “The final part of the transaction is being completed at the South African end with the expectation that the transaction would be completed in full in the second quarter of this year.

“This is a strategic acquisition that is in furtherance of our beyond beer agenda and which would provide us with a complimentary multi-category portfolio and strengthen our market share in the wider beverages market.  More importantly, it will help us to future-fit our business and enhance our long-term profitability through the addition of new products in the wines, spirits, and flavoured beverages categories.”

Essaadi explained that following shareholder endorsement in December 2023, the company had successfully sealed the deal, executing the necessary transaction documents with Heineken Beverages (Holdings) Limited of South Africa to acquire an 80 percent equity stake in Distell Wines and Spirits Nigeria Limited, along with 100 per cent of Heineken Beverages’ import business in Nigeria.

In his assessment of the company’s financial performance, the company CEO noted that while the company’s diligent management had managed to secure an operating profit of N45 billion, the brewer’s bottom line had been buffeted by powerful economic forces, leading to a net loss of N106 billion for the year 2023.

Essaadi revealed that not only did the staggering net loss weigh heavily on Nigerian Breweries’ bottom line in 2023, but also took a heavy toll on the company’s retained earnings, hindering the ability of the board to recommend any dividend payment for the year,a stark departure from the company’s illustrious track record of consistent dividend payments.

On the way forward, he stated: “The Board has explored different options with a view to improving the Company’s financial position and thereby creating the platform to enable us to return to profitability as soon as possible in line with the Board’s commitment to creating long-term value for our Shareholders. The Board has resolved to propose to shareholders for consideration and approval at the AGM, a recapitalisation scheme by way of rights issue.

“The objective is to raise fresh capital up to N600 billion that would be used to settle the outstanding Fx payables and part of the local bank facilities.”

Essaadi expressed confidence that, despite the near-term challenges and painful measures necessitated by the currency devaluation, the company was taking decisive steps to eliminate the naira devaluation risk and hefty foreign exchange losses that had ravaged its financials in the previous year. He affirmed that these measures would also serve to reduce the company’s significant interest burden, setting a course for a more robust and resilient financial position for the company, even in the face of ongoing economic volatility.

 Essaadi stated that the board had carefully considered a range of options to address the challenges facing the company and had arrived at the conclusion that a capital restructuring through a rights issue was the most suitable option at this juncture.

He underlined the board’s conviction that the proposed rights issue would provide a fair and equitable opportunity for all shareholders to increase their stake in the company, proportionate to their existing holdings, at a price that would be determined by the board with due consideration to prevailing market conditions.