Diageo takes full ownership of South Africa’s United National Breweries

Diageo Plc has taken full control of South Africa’s United National Breweries after acquiring the remaining 50% stake in the company.

London-based Diageo said it paid £14.8m ($22m) to acquire the remaining 50% stake in UNB. It also agreed to pay an additional $14m if UNB met certain future earning goals.

The company first bought a 50% stake in UNB two years ago, after paying $36m, with the remaining half held by Pestello Investments, a group linked with Indian drinks businessman, Vijay Mallya.

Diageo’s association with Mallya dates back to 2008, when it first attempted to buy Indian spirits company, United Spirits but failed to reach an agreement over price.

Diageo would eventually gain a majority control of United Spirits in 2014, after buying a 55% stake through its Indian subsidiary, Relay B.V.

United National Breweries brews a traditional form of African beer called Sorghum, made from a plant species of the same name. Some of United National Breweries’ brands include Chibuku, iJuba, among others. UNB is the largest producer of sorghum–based beer in South Africa and the transaction is conditional on approval from the South African Competition Commission.

United National Breweries has 11% of the South African beer market, behind South African Breweries(SAB) 79% market share, while Brandhouse Beverages (Pty) Ltd, a joint-venture between Diageo, Heineken and Namibia Breweries holds 7%.

Diageo, which is best known for its spirit brands such as Johnnie Walker Scotch whisky, Bailey’s Irish cream and Guinness stout, has ramped up its growth efforts in Africa and other emerging markets in recent years, spending billions acquiring assets in China, Brazil, India, among others. At the same time, it has sold some of its non-performing brands such as Bushmills Irish whiskey.

However, the company is now faced with a slowdown in revenue growth in emerging markets, forcing chief executive officer Ivan Menezes to embark on a cost savings drive to make the company more responsive to market forces.

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