BEER WARS: EABL issues a 12 month notice to terminate Brewering and Distribution Agreement (BDA) with TBL

East African Breweries Limited (EABL), a subsidiary of Diageo, has issued a 12- month notice to terminate its Brewering and Distribution Agreement (BDA) with Tanzania Breweries Limited (TBL), a subsidiary of SABMiller.

In a statement, the EABL Corporate Affairs Manager, Ken Kariuki, said that the notice was as a separate matter to another notice of terminating the agreement reached in 2002

The initial term of the BDA and SPA agreement with TBL was for five years. It expired in 2007. Since then the contract has continued to roll forward in accordance with its terms and despite a long series of discussions with SABM to renew, "we have been unable to agree the terms of a permanent renewal," he said.

The 2002 deal stopped competition in Tanzania and Kenya which had stagnated beer prices for close to five years. Essentially, it restricted SAB to Tanzania and EABL to Kenya - where it brews and markets for SAB.

The EABL's notice has come a few days after Judge Christopher Clarke of the UK commercial court has temporarily suspended a move by the EABL to acquire Serengeti Breweries Ltd (SBL) until arbitration between Diageo and SABMiller is concluded. Mr Clarke made the ruling on Tuesday following a suit by SABMiller that such acquisition violates a non-compete agreement between EABL and TBL.

Mr Kariuki said that the ruling maintains the status quo and that the arbitration would determine the resolution of the case. "This hearing was essentially an interim hearing to determine how the parties should proceed, pending resolution of the substantive issue, which will be resolved at arbitration," he said.

He said that the status quo meant that TBL and EABL should continue implementing the Brewing and Distribution Agreement (BDA) as normal.

"We are keen to start the arbitration process quickly so as to resolve this as soon as possible We have also given notice to terminate the BDA in 12 months' time as a separate matter," Kariuki said. He added: "The assertion that there can be a 'status quo' with the current BDA is unrealistic.

"We have clearly laid out that our future lies with Serengeti Breweries Limited(SBL). This is not only good for us and our brands, but also to promote competition within Tanzania and a higher profile for SBLs own Tanzanian brands like Serengeti.

" Diageo and SAB have free competition in Uganda where they own majority stakes in Uganda Breweries and NileBreweries respectively.

**Brace yourself for a very interesting show down in the next coming months....my take is that this beer war is going to turn ugly before they agree on a deal....

BEER WARS Just In:Diageo Tanzania buy frozen by SABMiller court move

The London High Court on Tuesday granted brewer SABMiller Plc an injunction to freeze a move by rival Diageo Plc to take a stake in a Tanzanian brewery and end a key contract.

"The High Court in London has granted SABMiller an injunction which stops (Kenya's) East African Breweries Ltd (EABL), which is 52.8 percent owned by SABMiller, under which TBL manufactures and sells EABL brands in Tanzania.

Serengeti is Tanzania's second biggest brewer after TBL and is owned by a group of private investors.

As part of a deal dating back to 2002, EABL owns a 20 percent stake in TBL and TBL owns a 20 percent stake in EABL's Kenya Breweries unit.

Source: Reuters-London

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.