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Heineken Considers Takeover of South African Brewer Distell

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(Bloomberg) --

Heineken NV, the world’s second-largest brewer, is in talks about a takeover of South African wine and spirits maker Distell Group Holdings Ltd.

Heineken approached Distell about a possible acquisition of most of its business, the South African company said Tuesday, confirming an earlier Bloomberg News report. Distell is considering its options, spokesman Frank Ford said by phone.

Distell shares jumped as much as 10%, hitting an intraday record. They were up 5.6% at 9:25 a.m. Tuesday in Johannesburg, giving the company a market capitalization of 33.6 billion rand ($2.4 billion).

Shares of Heineken advanced 0.9% in Amsterdam, valuing the brewer at 57 billion euros ($70 billion). Discussions are ongoing, though there’s no certainty they will lead to a transaction, Heineken said Tuesday.

Distell produces Klipdrift brandy, Nederburg wine, Amarula cream liqueur, Savanna cider and Bain’s Cape Mountain Whisky. Remgro Ltd., an investment vehicle of South African billionaire Johann Rupert, and Public Investment Corp., Africa’s biggest pension fund, each hold a little more than 30% of Distell, according to data compiled by Bloomberg.

The PIC increased its stake in 2017 after a shakeup of the drinks maker’s ownership structure, paying 170 rand a share. That’s 19% higher than Distell’s share price at the close on Monday, before the talks were announced.

An acquisition would be Heineken’s most significant transaction since 2018, when it formed a partnership with China Resources Beer Holdings Co., maker of the country’s best-selling beer. A purchase would add to $7.4 billion of deals announced in the global beverage industry this year, about 15% less than at this point in 2020, according to data compiled by Bloomberg.

Heineken is emerging from one of the beer sector’s toughest crises. Despite gains in Vietnam and Mexico, the brewer is still facing setbacks in key markets such as Brazil and the U.K. where restrictions on movement and sales have hurt demand. Earlier this year, the company laid off 8,000 employees. The brewer surprised analysts in April with stable first-quarter sales as emerging markets made up for declines in Europe.

South Africa was one of Heineken’s best-performing markets, which is surprising given the country’s recurring ban on alcohol.

Any deal for Distell would see Heineken Chief Executive Officer Dolf van den Brink, who took charge last June, make progress expanding into categories that have historically been more profitable than brewing, including liquor. It will also accelerate the decades-long strategy of his predecessor Jean-Francois van Boxmeer. During his tenure, van Boxmeer sought to tap growth opportunities in Africa, investing hundreds of millions of euros in promising markets such as Cote d’Ivoire, Nigeria and South Africa.

(Adds details from statement in second paragraph, details on Distell shareholders in fifth and sixth paragraphs)

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