Cross-shareholding Probe Delays Diageo’s $2 Billion EABL Sale
The Comesa Competition Commission is investigating cross-shareholding practices among major brewers, posing a significant obstacle to Diageo’s planned divestment from East African Breweries Limited (EABL).
Diageo currently owns a 65 percent stake in EABL and intends to sell it for an estimated $2.2 billion. However, the sale is on hold pending the outcome of the investigation into potential anti-competitive behavior related to shareholding patterns within the regional brewing industry.
Background on the Investigation
Willard Mwemba, CEO of the Comesa Competition Commission, addressed the issue recently, noting there is nothing inherently wrong with cross-shareholding among companies.
“… there is an ongoing investigation, generally for several beer companies that have cross-shareholding in each other as minority or majority shareholders, which is not a wrong thing. What becomes wrong is what you do with cross-shareholding,” he said.
Implications for Diageo and the Market
- Diageo faces the probe shortly after a $750,000 settlement in September for alleged anti-competitive conduct.
- EABL also owns Uganda Breweries in Uganda, highlighting Diageo's strong regional presence.
- The investigation could delay or complicate Diageo’s exit from the East African brewing market.
The watchdog has refrained from commenting further on transaction details until the inquiry is complete.
Author’s Summary
Diageo’s $2.2 billion sale of EABL is paused due to a competition probe into cross-shareholding, which could reveal anti-competitive patterns affecting East Africa’s brewing industry.
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