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$3b worth of D&G shares eludes Heineken

Published:Wednesday | March 16, 2016 | 3:00 AMSteven Jackson

Nearly $3 billion worth of Desnoes & Geddes shares remain outside of the control of international brewery giant Heineken, which sought to fully acquire the local brewery that trades as Red Stripe Jamaica.

It signals on the surface that some local shareholders defied selling and now retain hold on a combined 117.6 million shares or 4.2 per cent of Red Stripe. The combined market value of those shares up to Monday totalled $2.89 billion since the stock closed at $24.73. That equates to more value than many of Jamaica's medium-sized companies.

"Following the completion on 21st January of the tender offer to purchase for cash all outstanding ordinary shares of D&G, Heineken holds 95.8 per cent of the share capital of this company," said Heineken chief executive Jean-FranÁois van Boxmeer in the company's newly released annual report.

Heineken had sought to acquire all the 2.8 billion outstanding shares in Red Stripe. It needed to hit a threshold above 80 per cent in order to follow through on plans to delist the beer stock.

Despite the possibility of delisting from the JSE, the stock continues to trade periodically last Thursday, 60,280 units traded; on March 3, trades totalled 11,000 units; and on February 17, transactions amounted to 76,000 units. Its current trading price has fallen below the $30 (US$0.259) at which Heineken offered to buy.

Last November, Heineken announced plans to spend up to US$194 million to acquire all outstanding shares in D&G. This followed its purchase of Diageo Plc's 57.9 per cent shareholding in the company on October 7, a deal that took Heineken group's stake to 73.3 per cent at the time. The acquisition of Red Stripe formed part of Heineken's drive to grow its earnings in faster growth markets outside of Europe, which are predominantly in emerging markets.

Jamaica was part of a larger move by both international companies to realign global interests. In October, Heineken and Diageo completed a transaction to bring increased focus to their respective beer businesses and licensing arrangements in Jamaica, Malaysia, Singapore, and Ghana. The total net cash consideration payable by Heineken to Diageo for the transaction was US$780.5 million (€707 million), the majority of which was for Red Stripe's acquisition.

steven.jackson@gleanerjm.com