Tanzania plans to revoke consent for EABL's Serengeti Breweries deal

By Fumbuka Ng'wanakilala

DAR ES SALAAM, July 1 (Reuters) - Tanzania's competition commission has initiated a process to cancel approval for East African Breweries' (EABL) 2010 acquisition of a controlling stake in Serengeti Breweries.

EABL, owned by Britain's Diageo (LSE: DGE.L - news) , sold its 20 percent stake in Tanzania Breweries five years ago, opting to purchase a 51 percent stake in Serengeti.

The acquisition of Serengeti, which cost EABL $60 million, gave it a 28 percent market share and an avenue to increase sales in a market offering high growth potential.

Serengeti is Tanzania's second-biggest beer maker behind market leader Tanzania Breweries Limited, controlled by Diageo rival SABMiller (Xetra: BRW1.DE - news) .

"The commission has issued a notice of an intention to revoke its own decision with respect to the merger," a statement from Tanzania's Fair Competition Commission (FCC) said.

The FCC accused EABL of not making good on pledges made when it obtained permission for the deal in 2010.

"It was observed that, based on the rationale of the approval, the performance of Serengeti Breweries Limited was not as per expectations of the commission," it said.

It was not immediately clear how the deal would be unravelled if the FCC does reverse its approval retrospectively.

Julie Adell-Owino, corporate relations director for Kenya-based EABL, said the company had received the commission's notice of revocation and had submitted a response.

"EABL vigorously disputes the intended revocation and awaits a date for the formal hearing with the FCC," she said in a statement.

(Additional reporting by Duncan Miriri in Nairobi; Editing by David Goodman)