In a bold show of investor confidence, minority shareholders of Uganda Breweries Limited (UBL) have derailed East African Breweries Limited’s (EABL) attempt to take full ownership of the Ugandan beer and spirits giant.
Back in September 2024, EABL launched a tender offer to acquire the remaining 1.81% stake in UBL that it didn’t already own.
The Nairobi-listed brewer offered Shs5,630 per share—a significant premium—expecting an easy path to 100% control. But only 151,156 shares were tendered, and after regulatory vetting, just 78,268 were accepted.
That pushed EABL’s stake from 98.19% to only 98.32%.
Why Shareholders Said No
Despite the offer totaling Shs12.3 billion, investors resisted. Analysts say this wasn’t just about money—it was about UBL’s strong fundamentals and future potential.
“UBL is a cash-generating powerhouse,” said David Bateme of Crested Capital. “No rational investor exits a business like that without a compelling reason.”
UBL’s solid performance, diversified brand portfolio, and rising demand for spirits such as Uganda Waragi, Bond 7, Johnnie Walker, and Smirnoff have attracted long-term investor loyalty.
Cornerstone Asset Managers’ Simon Mwebaze echoed the sentiment: “Shareholders weren’t valuing just current cash—they were valuing long-term growth.”
A Questionable Valuation
The buyout offer was based on a valuation from Mazars BRJ, pegging UBL’s worth at Shs670.4 billion using EBITDA and discounted cash flow models.
But without a stock exchange listing, the valuation remained theoretical—relying on projections rather than market-tested value.
“The valuation may have seemed conservative to investors,” Mwebaze noted. “And with UBL contributing 21% of EABL’s total revenue, second only to Kenya, there was every reason to hold tight.”
Timing and Motivation
Some analysts speculate the buyout was timed to consolidate EABL’s control after the passing of longtime UBL chairman Martin Aliker, who may have held a notable stake.
Others see it as part of a larger effort to simplify ownership across subsidiaries, following Diageo’s 2023 move to raise its own stake in EABL to 65%.
Still, shareholders weren’t swayed.
Uganda: The Bright Spot
While EABL faced rising costs, foreign exchange losses, and tax headwinds in 2023, Uganda remained a high-performing market.
The group’s annual profit stood at Shs304.2 billion with a 68% payout ratio, offering Shs195.3 per share in dividends.
EABL hoped the buyout would “streamline operations.” But with shareholders refusing to budge, they’ll have to continue working with a minority group that sees its stake as far more than a cash-out opportunity.
For now, Uganda Breweries remains one of the few companies under EABL not fully owned. And for the minority investors who stood firm, the decision speaks volumes: sometimes, future value is the most compelling return.
