TBL /SABMILLER VS. EABL

Unfolding story:

East African Breweries Limited (EABL) issued a statement on Saturday that they wanted to cancel a pact with Tanzania Breweries Limited (TBL) and take a stake in Serengeti Breweries Limited(SBL), Tanzania's second-largest brewer. The decision was awaiting approval from Tanzania's Fair Competition Commission and its shareholders.

EABL said in a statement …"The board of directors of ... EABL announces that ... EABL entered into a conditional agreement with the shareholders of Serengeti Breweries Limited that could lead to EABL acquiring a substantial interest in ... the second largest brewing company in Tanzania,"

"The board also confirms that EABL has given notice to terminate its existing brewing and distribution agreement with Tanzania Breweries Limited for the sale and manufacture of brands in Tanzania," said the statement published in Tanzanian newspapers.

MAIN FACTS:

-EABL has also given notice to terminate its existing brewing and distribution agreement with Tanzania Breweries Limited, for the manufacture and sale of its brands in Tanzania.

-Issues have arisen between EABL and Tanzania Breweries Limited which are currently the subject of legal proceedings.

-Tanzania Breweries Limited currently remains the sole and exclusive manufacturer and distributor of EABL products in Tanzania.

-SBL is Tanzania's second largest brewing operation and maker of the popular Serengeti Lager.

-SBL currently accounts for 17% of the Tanzanian market by volume, and has grown market share by 10% over the last three years. Serengeti Lager, a premium priced product, is the flagship brand of SBL accounting for 85% of its sales volume.

-As at Dec. 31, 2008, SBL's total gross assets were 83,438 million Tanzanian Shillings (GBP38 million at current exchange rates).

-SBL will form an integral part of EABL's East African supply footprint providing additional capacity to Kenya and Uganda.

TBL Shareholding:

SABMiller owns a 52.83 percent stake in Tanzania Breweries Limited (TBL) and EABL holds 20 percent and the rest is owned by Tanzanian public and IFC.

TBL has a beer production capacity of just over 3.4 million hectolitres versus sales of about 3.25 million hectolitres per year. It has plants in Dar es Salaam, Mwanza and Arusha.

SABMiller seeks injunction on EABL Tanzania deal

However, Brewing giant SABMiller said on Sunday that Kenya's East African Breweries Limited's plan to end a deal with Tanzania Breweries Limited and take a stake in a competitor was a breach of contract.

Issues have arisen between EABL and TBL :

"TBL considers that EABL's actions represent a fundamental breach of their undertakings to TBL and SABMiller, having negotiated a competitive deal while remaining as a shareholder of TBL and a member of TBL's board," SABMiller said.

The statement went on to say “In the light of this, TBL and SABMiller are seeking an injunction against EABL's actions and proposed transactions via a court application in the UK courts, pending the commencement of arbitration proceedings if the parties cannot resolve their differences amicably.”

SABMiller said EABL and TBL had had a seven-year relationship in which TBL had boosted the Kenyan brewer's brand sales at a 12.7 percent compound rate. The company said it would continue with its contractual obligations to EABL as usual.