Heineken 'plans to unceremoniously snaffle' Distell, says Ninety One

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Heineken is making a move on South African-owned Distell
Heineken is making a move on South African-owned Distell
  • Distell shareholders will vote on a R38.5 billion takeover bid by Heineken on Tuesday.
  • Investment manager Ninety One says the offer is too low. 
  • It also objects to the "unfair" terms of the deal.

Ahead of an extraordinary general meeting on Tuesday, where Distell shareholders will vote on a takeover by Heineken, large fund manager Ninety One said the Dutch giant’s bid was unfair and too low.

Heineken announced its offer to buy the South African company for R38.5 billion in November 2021.

Its offer will split Distell into two businesses.

Distell's cider and other ready-to-drink beverages as well as spirits and wine brands will form a new business, which will be combined with Heineken’s Southern African business and the Dutch group’s interest in Namibia Breweries Limited (NBL), which owns Windhoek and Tafel.

Distell shareholders are being offered R165 in cash per share for their stake in Newco – or they can opt for unlisted shares in Newco, or a combination.

Then, shares in Capevin - which contains Distell’s other remaining brands, including its Scotch whisky unit - will be unbundled, with Distell shareholders offered R15 per Capevin share.

Together, Heineken’s offer to Distell shareholders come to R180 per share, which is seen as too low by some shareholders, including Ninety One. Ninety One – which was previously Investec Asset Management, before it split off in 2020 – manages assets worth £141.7 billion (~R2.9 trillion) on behalf of clients.

Investment specialist at Ninety One Rob Forsyth said: "The proposed scheme of arrangement involves a complicated web of transactions between Heineken and Distell. The cash offer is not appealing. The R180 per share is at a steep discount to other listed global beverage companies."

Forsyth added that Distell is well placed to take advantage of global trends that have seen beer lose market share to other beverages like spirits and wine. In addition to its Savanna cider brand, Distell, which is the second-largest cider producer in the world, also owns the Hunters Dry, Nederburg, JC le Roux, Klipdrift and Amarula brands.

Forsyth highlighted the growth of the global cider market and Distell’s flexible local production  as the company’s other competitive advantages. 

"Heineken plans to unceremoniously snaffle this asset and seize the majority of this high-quality liquid investment opportunity."

The investment specialist also pointed out that shareholders have lost "unique" assets, following some of the beverage company sales South Africa has seen.

"Think Cadbury Schweppes, Suncrush, ABI and then SABMiller to ABInBev. At least in the latter transaction, shareholders had the option of remaining invested in a listed entity.  We have not been given this option with Distell," said Forstyth.

Using transactions in the global beverage market over the last decade as a benchmark, Distell should be valued at between R230 and R250 per share.

The local liquor manufacturer's latest trading update shows that it has a strong balance sheet, while Heineken’s levels of profitability are inferior to Distell’s, he said. Forsyth also said the deal will be more advantageous to Heineken, which will contribute less but hold more of the company and benefit from R1.5 billion in cost savings.

He described the outcome as unfair, saying shareholders being given an option to remain in the unlisted entity post-acquisition would benefit significant shareholders like Heineken, more than the remaining shareholders like pension funds or unit trust holders. 

"We find the absence of protection for long-standing pension savings startling. The price is too low. The structure makes it difficult for the average pension fund or unit trust to remain invested."

Accordingly, Ninety One will be voting against the scheme on behalf of its investors.

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