South Africans Buy Kenyan Wine Dealer

Nairobi, Kenya — South Africa's Distell Group has bought up the Kenyan government shares in Kenya Wine Agencies Limited (KWAL), the leading regional distributor.

However Prof Peter Kimuyu, chairman of Kenya's Privatisation Commission, did not disclose any financial details except to say it was a market driven process.

The deal was approved by the previous Kenyan parliament, and all that remains is to agree on the share price. Sources say the sale will be completed by June 30 this year.

As a condition for the sale, Distell is required to sign a long-term agreement to give KWAL exclusive rights to sell its products in Kenya and East Africa. KWAL is already the exclusive distributor of Distell's products in Kenya, Uganda and Rwanda.

Distell Group Limited (Distell) is an investment holding company involved in the production, marketing and distribution of alcoholic beverages in South Africa. Distell is majority-owned by Remgro-Capevin Investments Limited.

The company principally produces and markets ready-to-drink (RTD) beverages, wines, spirits and ciders.

The new deal is part of the Kenyan government's second phase of privatisation, which has stalled since the first round was completed in 2002.

The process was restarted to help the country's treasury raise revenue as it faces an estimated $2.9 billion deficit in its 2012-13 budget.

Kenya plans to sell stakes in several high-end hotels, including Hilton and Intercontinental, and in at least five sugar processing companies.

The government owns a 72.65% stake in KWAL through the state Industrial & Commercial Development Corporation. Centum Investment, a private equity company listed on the Nairobi Securities Exchange, has a 26.43% stake and the rest is owned by other investors.

The government will keep the biggest shareholding, of 42.65%, in KWAL, even with the additional sale of 4% of its stake to the company's employees. It aims to sell its remaining shares in the next two to four years as the value of the company improves, according to the Privatisation Commission.

The deal to sell the stake to Distell is viewed in Kenya as a way of preventing it from terminating its exclusive distribution contract it holds with KWAL. Such a termination would badly affect the Kenyan company, which has limited capacity to make wines and spirits.

Last year, Distell and KWAL went to court when the former declined to renew the exclusive distribution contract, but they settled the dispute out of court.

The new deal will cement Distell's presence in the expanding east African market, as KWAL is the regional leader in the marketing of wines and spirits.

The company has 12 primary and nine secondary production sites in South Africa. It has 17 trading depots in South Africa and four in Namibia.

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