Early Bidders to Get Priority as Diageo Buys EABL Shares

Diageo, a British multinational brewer, will give EABL shareholders and early bidders first priority in its plan to purchase an additional 14.97 percent stake in the local subsidiary.

If there is an oversubscription in the offer, which opened on Monday and will run until March 17, the priority treatment will kick in, with a pool of 47.5 million shares designated towards a guaranteed allocation of up to 10,000 shares for all bidders in the first phase of the sale.

The second phase, which runs from February 27 to March 17, will include an additional 55 million shares to satisfy bidders who did not receive their full allocation in the first phase.

Diageo is making an offer to all owners of unencumbered shares of the brewer to purchase an additional 118.4 million shares of EABL at a price of Sh192 per unit.

“In the event that the tender offer is oversubscribed, and the guaranteed allocation pool is insufficient to satisfy each accepting shareholder’s first 10,000 ordinary shares, then preference to the guaranteed allocation pool will be given to shareholders appearing on the register on the record date, whether or not such shareholder is an early acceptance shareholder or a final acceptance shareholder,” said Diageo in the tender document.

“Of the remaining 70.89 million ordinary shares that are the subject of the tender offer, up to 55 million shares will be designated the ‘early acceptance pool’ to be allocated in priority to early acceptance shareholders.”

The company’s decision to give priority to early bidders aims to reward current shareholders who now have the opportunity to sell their stock for a sizeable monetary gain as well as to encourage acceptance of the offer.

On the last trading day before Diageo announced its offer on October 14, 2022, EABL’s share price was Sh138. The Sh192 offer price implies a premium of 39% above that price.

In the subsequent three-and-a-half months, the share has appreciated in price to close at Sh177.25 on Monday.

“The early acceptance shareholders will enjoy the benefit of having their shares included in the larger pool allocated for the first closing, and should the tender offer be oversubscribed, be likely to be able to sell a greater proportion of their shares than those shareholders who only apply later before the second closing,” said Diageo.

As long as they are on the brewer’s books by the register closure date of February 16, people who make offers to sell their shares would still be entitled for EABL’s interim dividend of Sh3.75 per share for the half year ended in December, according to Diageo.

This is because the sold shares will be settled and transferred in Ap