Cross-shareholding Probe Delays Diageo’s $2.2 Billion EABL Sale
The Comesa Competition Commission’s investigation into cross-shareholding among major brewers has paused Diageo’s planned divestment from East African Breweries Limited (EABL). This probe surfaces amid concerns about possible anti-competitive behavior in the market.
Background and Impact
Diageo, a British multinational, intends to sell its 65 percent stake in EABL, valued at approximately $2.2 billion. However, the ongoing inquiry by the regional competition authority means the sale will remain on hold until further notice.
Statements from the Competition Commission
“There is nothing inherently wrong with cross-shareholding, it may have potentially harmful patterns,” said Willard Mwemba, Chief Executive Officer of the Comesa Competition Commission.
He added that the probe covers multiple beer companies with varying degrees of shareholding in each other, which in itself is not illegal. The concern lies in how that cross-shareholding is used in the marketplace.
“…there is an ongoing investigation, generally for several beer companies that have cross-shareholding in each other as minority or majority shareholders, which is not a wrong thing. What becomes wrong is what you do with cross-shareholding,” he explained.
Previous Compliance Actions
Diageo is still dealing with the aftermath of a $750,000 settlement imposed in September for engaging in anti-competitive practices, further complicating matters within the market.
EABL’s Operations
In Uganda, EABL operates Uganda Breweries, adding to the regional significance of the company under review.
Summary
The cross-shareholding investigation by the Comesa Competition Commission delays Diageo’s $2.2 billion sale of its EABL stake, highlighting regulatory scrutiny over business practices in East Africa’s brewing industry.
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