Cross-shareholding Probe Delays Diageo’s $2 Billion EABL Sale
The Comesa Competition Commission investigation poses a major obstacle for Diageo after it recently paid a $750,000 settlement for anti-competitive behavior in September. Diageo owns a 65 percent stake in East African Breweries Limited (EABL), which includes Uganda Breweries in Uganda.
The commission is reviewing cross-shareholding practices among leading brewers, which could halt Diageo’s planned divestment from EABL amid concerns about anti-competitive risks.
Investigation Details and Impact
The proposed sale of Diageo’s majority stake in EABL, valued at approximately $2.2 billion, will be paused during the ongoing probe by the competition commission focused on cross-shareholding by dominant players in the Common Market.
“...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,” said Willard Mwemba, CEO of the regional competition watchdog.
He emphasized that while cross-shareholding itself is not inherently problematic, the behavior that follows it could create harmful market practices. The watchdog is withholding specific comments on the transaction until the investigation concludes.
Regional Market Concerns
The probe signifies broader scrutiny of dominant conglomerates operating in East Africa, aiming to ensure fair competition and prevent monopolistic arrangements through ownership entanglements.
Diageo’s entry into the settlement earlier this year reflects ongoing regulatory vigilance in the region.
Author’s Summary
The ongoing Comesa probe into beer industry cross-shareholding may delay Diageo’s $2.2 billion EABL stake sale, highlighting regulatory efforts to curb anti-competitive behavior in East Africa.