AB Inbev, SAB Miller merger: KBL will not retrench
On Tuesday, the Botswana Competition Authority (CA) heard submissions from a team representing Anheuser-Busch InBev (AB Inbev), a public company incorporated in Belgium and listed on Euronext Brussels Stock Exchange, Mexican Stock Exchange, Johannesburg Stock Exchange and the New York Stock Exchange, and SAB Miller, a public limited company incorporated under the Laws of England and Wales with a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange.
AB Inbev is looking to acquire the entire issued share capital in SABMiller. AB Inbev is the largest brewer in the world and boasts a 25% global market share and SAB Miller is the world’s second largest brewer. Should the deal go through, it will result in a “massive producer generating about one out of every three beers made globally.”
The competition watchdog’s interest in the deal is because SAB Miller owns a 40% stake in both the Kgalagadi Breweries Limited and Botswana Breweries hence does business in Botswana. The remaining 60% is owned by Botswana Stock Exchange listed Sechaba Breweries Holdings Limited.
Leading the merger parties of the transaction at the public hearing was Rizwan Desai, a partner at Collins Newman and Company. Asking that the CA approve their submission, Desai said there were no competition concerns nor were there concerns for coordinated effects.
“There will be no material changes to the structure of the market in Botswana,” he said. Further, Desai highlighted that the merger will not raise input or customer foreclosure concerns. The reasons for this Desai said were that “merger parties do not operate at different levels of the supply chain and that they do not supply inputs to each other’s competitors nor are they customers to each other’s competitors. Possible termination of DBG [distributor of AB Inbev’s products in Botswana] will not lead to uncompetitive behaviour. And merger parties do not supply inputs to third parties in the beer industry in Botswana.”
Desai also said the merger will not raise any public interest concerns: “There are no significant overlaps in activities of AB Inbev and SAB Miller. In particular, AB Inbev does not envisage the merger leading to involuntary retrenchments. Also, stakeholders, including suppliers, will not be affected by the merger for the reason that there will not be any material change in the structure of the clear beer market in Botswana,” he remarked.
The CA Review Committee raised a number of questions, among them, the citizen economic empowerment question now that SAB Miller was being acquired 100% by AB Inbev.
Responding, Desai emphasized that SAB Miller was not citizen owned, rather was a publicly traded company listed on both the London and Johannesburg Stock Exchanges which stocks are available for purchase even to the citizens of Botswana. He stated that the merger will not affect the shareholding structure of both the Kgalagadi Breweries and Botswana Breweries which are owned 60% by Sechaba Breweries Holdings Limited.
“Sechaba is owned in part by some local entities including pension funds managers who represent Batswana. Also, there are citizen empowerment schemes currently in place and these will not change,” said Desai.
The review committee also asked about the plan to continue engaging local suppliers post-merger. Desai responded that the issue was not specific to the merger as the business structure of Kgalagadi Breweries was not going to change. “They will be no material change to the merged entity within Botswana as no productive assets will be added,” he said.
Finally, the review committee asked what transaction specific benefits woukd accrue to Botswana. “There will be no direct impact in Botswana nor will there be an enhancement of merger party capabilities in Botswana. However, Kgalagadi Breweries will continue to procure from local suppliers provided they satisfy commercial terms,” responded Desai.
The CA promised merger parties a response in less than 30 days.
For the deal to go through, AB Inbev needs to win over regulators in several markets including Botswana but most notably the United States and China where divestitures are needed to win government approval for a merger. Fortune Magazine has reported that to win approval in the United States and China, the two markets analysts most fretted about, AB InBev has announced separate deals to potentially sail past antitrust worries. In November, AB InBev agreed to sell the 50% stake that SABMiller owns in MillerCoors to Molson Coors in a $12 billion transaction, while in March, it agreed to sell SABMiller’s stake in a Chinese brewer for $1.6 billion. Both of those deals are contingent to the successful closing of the bigger SABMiller deal.
Meanwhile, the South African market is not making things any easier for the Behemoth Belgian brewer. The South African Competition Commission is reported to want to extend the deadline again for its investigation of the merger "This transaction raises certain concerns which should be considered and addressed," Competition Commission spokesperson, Itumeleng Lesofe was quoted as saying. "It is for this reason that we need more time to evaluate the transaction." The commission had been due to finish its investigation on Tuesday but Lesofe said it can secure an extension of up to 15 days. It has already extended the deadline three times.
AB InBev is active in the production, marketing and distribution of beer, non-alcoholic beer and soft drink products. The company does not currently source raw materials from Botswana nor operate a brewery in Botswana. Its beer products are imported and sold in Botswana through a third party distributor DGB (Pty) Ltd. These products are Corona Extra, Stella Artois, and Beck’s Blue. DGB is a South African company engaged in distribution as well as manufacturing and marketing of wine.
SABMiller is a multinational brewing and beverage company, headquartered in the United Kingdom. Through its subsidiaries it is engaged in the manufacture, distribution and sale of various types of beverages, including brewing and hop farming activities, and offers beer, soft drinks and other alcoholic and non-alcoholic beverages. SABMiller has operations in 75 countries across Africa, Asia, Australia, Europe, and Latin America. SABMiller operates in Botswana through Kgalagadi Breweries (Proprietary) Limited which produces and distributes beer and non-alcoholic beverages.
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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