Heineken can buy Distell – with conditions

South Africa’s Competition Commission has approved Heineken’s bid for wine and cider company Distell Group on the condition, among others, that the Dutch company invests R10 billion in the country over five years.

Heineken is a Dutch multinational brewing company in Amsterdam that owns over 165 breweries in more than 70 countries. It produces 348 international, regional, local and speciality beers and ciders.

Domestically, Heineken Group also operates the Sedibeng brewery, producing a range of beers, including Heineken, Amstel, and Windhoek.

Distell Group is a South African brewing company that owns well-known brands such as Hunters Dry, Savanna, Klip Drift, JC Le Roux and Amarula.

The Dutch brewer announced its planned purchase of Distell and Namibia Breweries in November 2021. These mergers would form a southern African drinks group worth €4 billion (R69.2 billion).

Heineken noted that these purchases would create a new regional group to compete with larger rivals Anheuser-Busch InBev and spirits giant Diageo.

In response to the acquisition bid of Distell, the South African Competition Commission recommended that the Competition Tribunal – which makes the final decision – approve the merger subject to conditions.

This recommendation comes from the fact that the transaction is likely to prevent or lessen competition in the relevant markets, as the purchase would give Heineken nearly 65% of the cider market in South Africa.

To mitigate hyper control, the Dutch brewer agreed to divest its cider brand Strongbow in South Africa and other countries subject to the South African Customers Union.

Heineken’s commitments as conditions for approval

The Competition Commission put six public interest commitments in place as conditions for approval – the main one being that the beer group invest R10 billion into the country over a five-year period.

The other conditions that will have to be met by the merged entity include:

• Implementing a R3 billion employee share ownership scheme – equity will be directed to workers of the merged entity in its South African operations.
• Establishment of a R400 million supplier development fund – which will be used to invest in South African SMEs.
• A R200 million contribution will be made to promote localisation and growth initiatives within the country.
• R165 million investment into tavern transformation.
• Maintain employee headcount for a period of five years – to address employment concerns in South Africa, the merging parties have agreed not to retrench any employees below specified managerial grades.