State okays Japanese brewer's Sh388b takeover of Diageo's EABL stake

Kenya’s competition watchdog has approved Asahi Group Holdings’ acquisition of Diageo’s controlling stake in East African Breweries (EABL).

This is after the Japanese brewer agreed to set aside adequate cash to cover outstanding liabilities and reserve refrigeration space for rival products.

The Competition Authority of Kenya (CAK) said the merged entity must reserve sufficient funds from the transaction consideration to meet any outstanding liabilities, ensuring the deal does not disrupt supplies or hurt small and medium-sized enterprises.

The regulator also ordered that at least 20 per cent of the refrigeration space EABL provided to retail outlets be reserved for non-EABL or non-Asahi branded products.

The refrigeration condition applies to all retail outlets, except top-end drinking establishments, supermarkets, liquor stores in petroleum stations, and hotels rated above two stars.

The CAK approved the acquisition of sole control of UDV (Kenya) Ltd unconditionally. The transaction involving Diageo Kenya Ltd was approved subject to the two conditions.

The approval removes one of the largest regulatory hurdles to Diageo’s exit from Kenya, a deal first announced in December 2025 that transfers control of one of East Africa’s most recognisable drinks companies from Britain to Japan. Diageo also confirmed the CAK decision.

The transaction covers Diageo’s 65 per cent stake in EABL and its 53.7 per cent shareholding in Kenyan spirits group UDV Kenya Ltd. Asahi proposed to acquire sole control of both entities.

Asahi will pay approximately Sh388.4 billion in total, acquiring Diageo’s 100 per cent stake in Diageo Kenya for Sh304.2 billion and a 53.8 per cent stake in UDVK for Sh83.6 billion. After tax and deal costs, Diageo will receive Sh297.7 billion. The transaction values the Nairobi Securities Exchange-listed EABL at Sh621.4 billion.

EABL reported net sales of Sh128.9 billion for the year to June 2025 and net debt of Sh29.6 billion. The brewer, which commands roughly 80 per cent of Kenya’s alcohol market, reported record net revenue of Sh146 billion for the year ended June 2026, a 13 per cent increase, with net profit up 49 per cent to Sh18.2 billion.

CAK said its assessment examined competition in the markets for production, distribution and retail of beer and cider, as well as the production and supply of malt and brewing grains. It also considered public interest issues, including the competitiveness of SMEs, the effect on employment, and the government’s agenda of promoting investment.

The refrigeration requirement strikes at a powerful part of beer distribution in Kenya. Refrigerated display space determines which drinks are visible and immediately available to customers, particularly in small shops, bars and restaurants.

By opening part of that space to competitors, the regulator is allowing Asahi’s entry while limiting EABL’s ability to use its retail infrastructure exclusively for its own portfolio.

Earlier reports said the CAK had proposed a reserve fund of up to Sh15 billion to cover potential liabilities, legal disputes and third-party claims linked to EABL. The final language after approval did not specify that exact amount.

Diageo had pushed back against the reserve fund requirement in August. The firm had said the concerns raised had “absolutely no connection to the transaction and their imposition would be unlawful.” Diageo and Asahi had said they continued to engage with CAK.

The deal has also faced court challenges. In April, a Kenyan court dismissed an application from distributor Bia Tosha seeking to stop the sale. Bia Tosha had accused Diageo, EABL and UDV of alleged unfair competition practices dating back to 2016 and argued that completing the sale would make it harder to enforce any potential court ruling. A separate legal challenge remains in play, centring on Diageo’s decision to increase its stake in EABL four years ago.

EABL’s portfolio includes Tusker, Senator, Kenya Cane and Chrome, and it operates through businesses in Kenya, Uganda and Tanzania.

Diageo has been selling African assets as part of a strategy to exit the continent. It has already disposed of businesses in Nigeria, Ghana, Seychelles, Cameroon and Ethiopia. Africa accounted for only 9 per cent of the group’s reported net sales.

For Asahi, the deal marks its first direct operations in Africa. The Super Dry brewer has said it will maintain EABL’s listing status on the Nairobi Securities Exchange and does not plan to take its stake beyond 65 per cent.

Asahi stated the acquisition provides “a leading platform in Kenya and the East African market, which is expected to deliver long-term growth driven by population increase and economic expansion".

Diageo will enter into licensing and transitional service agreements with EABL, allowing the brewer to produce Diageo spirits brands including Smirnoff and Captain Morgan as well as Guinness under licence, giving Diageo a route to East African consumers without retaining ownership of the breweries.

The approval brings the transaction closer to completion, subject to remaining regulatory, legal and transaction requirements. The parties have not yet announced that ownership has formally transferred or that consideration has been paid.