March 7 - Diageo plc ('Diageo'), Heineken International BV ('Heineken') and Namibia Breweries Limited ('NBL') have today announced that they have reached agreement to form a new joint venture for their combined beer, cider and RTD businesses in South Africa, to be called DHN Drinks (Pty) Limited ('DHN Drinks'). The new joint venture builds on the success of brandhouse Beverages (Pty) Limited ('brandhouse'), the parties' current cost-sharing joint venture in South Africa which was formed in July 2004.
Diageo and Heineken will each own 42.25% of DHN Drinks and NBL will own 15.5%. Each party will share in the profits of DHN Drinks in proportion to their shareholding. brandhouse will continue to market and distribute the parties’ products in South Africa.
In addition, Diageo and Heineken will enter into a second new joint venture in South Africa ('Supplyco'). Supplyco will construct a brewery and bottling plant in Gauteng province, South Africa, and will produce Amstel and certain other key brands. Heineken will own 75% and Diageo will own 25% of Supplyco.
In the first two years Diageo will invest £100 million in DHN Drinks and Supplyco. The investment meets Diageo’s return criteria.
The transaction, which is subject to regulatory approval, is expected to complete on 31 March 2008.
Nick Blazquez, Managing Director of Diageo Africa said:
‘The decision by Diageo, Heineken and Namibia Breweries to commit to a closer relationship in South Africa reflects the success of brandhouse and acknowledges the changing nature of the beverage alcohol market in South Africa. We have already demonstrated that a combined beverage alcohol distribution company can capitalise on the growth opportunities in markets such as South Africa and the new structure will enable us to realise further growth opportunities as a result of the strong platform we will create together.‘
Tom de Man, Heineken’s Regional President Africa and the Middle East, commented:
‘With Africa now Heineken’s fastest growing region, with the Heineken brand growing 70% in South Africa and Amstel very clearly still a favourite with South African consumers, there is no better time to invest in growth. Our three businesses already have a strong, successful partnership and I am excited about the new opportunities that the combination of our brands and local brewing will create.‘
Sven Thieme, NBL’s chairman said:
‘Following the successful establishment of brandhouse in 2004, we have as a next step put our brands together so as to maximise the mutual benefits of a joint portfolio of premium products. For us this investment means that NBL now has a tangible commercial interest in the sales and distribution of all brands that are part of this new profit sharing venture.‘
About Diageo
Diageo is the world’s leading premium drinks business. With its global vision, and local marketing focus, Diageo brings to consumers an outstanding collection of beverage alcohol brands across the spirits, wine and beer categories including Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Cuervo, Captain Morgan and Tanqueray, and Beaulieu Vineyard and Sterling Vineyards wines. Diageo trades in some 180 countries around the world and is listed on both the London Stock Exchange (DGE) and the New York Stock Exchange (DEO).