Diageo sells stakes in two brewers to Heineken for $780.5 million

Wed Oct 7, 2015 4:58am EDT
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By Aastha Agnihotri

(Reuters) - Diageo Plc (DGE.L: Quote), the world's largest spirits company, said it had sold its stakes in Jamaican brewer Desnoes & Geddes Ltd DG.JS and GAPL Pte Ltd, the majority owner of Malaysia's Guinness Anchor Berhad GUMS.KL, to Heineken NV (HEIN.AS: Quote) for $780.5 million.

The transaction also includes Diageo's acquisition of a 20 percent stake in Guinness Ghana Breweries Ltd GGBL.GH from the Dutch brewer, raising Diageo's total stake in GGBL to 72.42 percent.

The maker of Smirnoff vodka, Guinness beer and Johnnie Walker whisky said the deal with Heineken would increase the companies' focus in beer businesses in Jamaica, Malaysia, Singapore and Ghana.

Diageo sold its 57.87 percent stake in D&G, the maker of Red Stripe beer, and its 49.99 percent stake in GAPL to Heineken, the companies said on Wednesday.

Diageo said the deals would result in an exceptional profit after tax of about 440 million pounds ($671 million).

The company generates one-fifth of its revenue from beer, mostly the Guinness brand, which is growing more slowly than spirits. Despite the weak performance, Diageo often says the business is critical, since it gives it a route to market in Africa, making it easier to sell its spirits such as Johnnie Walker whisky.

"It (the deal) provides a strong route to consumer for Guinness which will grow the brand in these markets," Chief Executive Ivan Menezes said in a statement.

Heineken, the world's third-largest brewer, said it would be able to drive the investment and strategic direction of the operating companies in Jamaica and Malaysia.   Continued...

A man walks past barrels outside the Diageo Shieldhall facility near Glasgow, Scotland August 26, 2010.    REUTERS/David Moir