May 21, 2021

Heineken, the Dutch brewing giant, is in talks to buy a majority share of Distell Group, the South African wine and spirits company.

The potential tie-up between the two companies – which both have confirmed as being a possibility in statements – has sparked interest among analysts as it would be one of the sector’s largest transactions this year.

Heineken, which is the world’s second-largest brewing company, is looking to continue its previous efforts to make inroads into Africa.

But, by entering the wines and spirits market in a major way, the Amsterdam-headquartered brewer, which was founded in 1864, would also be branching out in a new direction.

In a statement on its website, Heineken acknowledged that it was interested in Distell, which owns brands including Amarula (cream liquor), Durbanville Hills (wine), Hunter’s Dry (cider), Nederburg (wine) and Savanna (cider), but said the outcome of talks was uncertain.

“Heineken NV notes the announcement from Distell Group Holdings Limited (Distell) and confirms that it is currently engaged with Distell regarding a potential transaction,” the statement said.

“Discussions are ongoing, but note that there can be no certainty that an agreement will be reached. Further announcements will be made as appropriate.”

Reports have noted that if Heineken acquires part of Distell, which is the world’s second-largest cider producer and is worth about 31.8 billion rand (€1.85 billion), it would be the Dutch company’s largest deal since it penned an agreement with China Resources Beer Holdings three years ago.

The coronavirus, which has forced the mothballing of countless drinking venues, has caused major headaches for Heineken, which cut its global headcount by 8,000 earlier this year.

However, buoyant sales in some emerging markets offset difficulties in other nations, helping the company to achieve flat sales growth in the first three months of this year, a result seen as impressive by some analysts given the unprecedented trading challenges.

In showing an interest in Distell, Dolf van den Brink, Heineken’s CEO, is looking to make his first acquisition since taking control at the company in June 2020.

While Distell has been expanding across its home continent in recent years, the company has faced competition at home from none other than Heineken, which five years ago debuted its Strongbow brand in South Africa.

Indeed Heineken has already made multiple investments in Africa, reports have noted, having previously put money into other major markets on the continent, notably Nigeria.

In its statement, reported widely by media, Distell said that it had been approached by Heineken about “the potential acquisition of the majority of Distell’s business”, but it too warned that a deal might not be concluded.

“Bearing in mind that there can be no certainty that an agreement will be reached, shareholders are advised to exercise caution when dealing in their Distell securities until a further announcement is made,” the statement added.

Other Distell brands include Deanston, a whisky, Bernini, a sweet grape frizzante, and Viceroy, a five-year-old brandy that was launched in South Africa in 1940 and now claims the top spot among brandies in Kenya.

According to reports, Distell has enjoyed sales growth in major African markets such as Kenya, Mozambique and Nigeria from the second half of 2020 onwards, more than offsetting the effects of bans on the sale of alcohol in South Africa.

Describing itself as “a global business with roots in South Africa”, Distell describes its brands as having “rich provenance and authenticity”. The company has 4,400 employees worldwide and an annual turnover of about 26.1 billion rand ($1.87 billion).

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