Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
Diageo asks court to dismiss bid to stop sale of its stake in EABL
Diageo global headquarters on Great Marlborough Street, London, England. Diageo fights to proceed with the Sh300 billion sale of its EABL and UDV Kenya stakes to Asahi, despite a distributor’s legal challenge.
British multinational Diageo has opposed an application seeking to block it from selling its entire 65 percent stake in EABL and its holding in spirits maker UDV Kenya to Japanese beverage firm Asahi Group Holdings.
Diageo told the High Court that the proposed transaction valued at Sh300 billion is at the shareholder level, and does not involve any sale of Kenyan operating assets by EABL, Kenya Breweries Limited (KBL), or UDV.
In the deal, Asahi would take full control of Diageo Kenya, the investment vehicle through which the British firm holds the EABL stake. The Japanese firm would also take ownership of Diageo’s 53.68 percent holding in UDV Kenya. EABL owns the remaining UDV Kenya stake and also has management control of the unit.
Diageo further said it was not a party in the case filed by Bia Tosha Distributors Ltd against KBL in 2016, and an attempt to drag it into the matter was an afterthought and for collateral purposes.
Diageo submitted that Bia Tosha should not be allowed to ‘weaponise’ conservatory orders to derail a commercial transaction.
“Ultimately, the Application is shown to be hollow, built on quicksand, and being a brazen attempt to over-reach and advance private commercial interests under the guise of constitutional litigation, ought to be rejected with costs,” Diageo submitted.
The British multinational said the application was a clear attempt to ‘hoodwink the court’ to interfere with a major and nationally significant transaction, in a bid to advance private commercial interests of Bia Tosha.
Bia Tosha says Diageo’s exit would undermine its court case that started in 2016 over beer distribution rights and make any eventual judgment harder to enforce.
The distributor argues that KBL and UDV (Kenya) unlawfully terminated its routes in 2016 and withheld a Sh38 million goodwill refund, and fears that if Diageo transfers its shareholding to Asahi, a key party it views as ultimately responsible will be beyond the court’s reach.
Bia Tosha asked the court to grant the orders, arguing that it will preserve the substratum of the case, pending the determination of the dispute.
The firm argued that the sale would render its case useless as splitting the shares and the ‘exit’ of Diageo from the Kenyan market would have the effect of frustrating the realisation of any decree, which may be awarded in its favour.
The court will give a ruling on the matter on April 9.
Ms Anne-Marie Burugu (above), a director of Bia Tosha, said putting the company to the pain and trouble of having to litigate in the UK would render the petition useless.
“Our business has in effect been destroyed; litigating in another jurisdiction would be adding salt to injury,” she said through her lawyers.
She added that the transaction on the sale of the shares is time-bound and once completed, it cannot be undone, and that the prejudice it will suffer is not speculative.
She said Bia Tosha is claiming damages of Sh25 billion from the termination of the contracts, and the least the court can do is to order the beer makers to deposit the amount in an interest-earning account.
In response, Diageo said it was not a party to the distributorship agreements from which the dispute arose.
“It is worth reiterating that no Court has ever found Diageo to be in contempt. It is also telling that Diageo was not made a Respondent to the Applicant’s Application for contempt of Court dated 11th April, 2023,” the firm submitted.
KBL, EABL, and UDV (Kenya) also opposed the application and said the court should not grant an order whose end result is to hurt third parties that were not parties to the case.
The dispute stems from a 2000 agreement where KBL granted Bia Tosha the rights to distribute beer in Bisil, Kajiado, Kitengela, Athi River, Industrial Area, South B, Nairobi West, Kenyatta, Langata, Rongai, Kiserian Magadi, Upper Hill, Ngong Road, Hurlingham, Kawangware, Satellite, Dagoretti, UDV A, UDV B, and UDV C.
The distributor paid goodwill of Sh27.3 million and rights granted Bia Tosha to distribute KBL’s products, excluding keg beer.
KBL then repossessed Baba Dogo, Dandora I and II, and Kariobangi North, from Bia Tosha, for the distributor to serve the new areas.
Bia Tosha requested a refund of the goodwill for the territories that were repossessed, a request that was declined as KBL maintained that the amounts were non-refundable, and further claimed that it was within its discretion to appoint other distributors as the agreement was non-exclusive.
