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Raya’s Shareholders Cash in 742pc of Par

Shareholders of Raya Brewery positively welcomed the full acquisition from BGI Brewery with an amount they could only gain in 53 years as a return if they decide to hold their shares in the Company.

Gathered in Meqelle- 797.4Km from Addis Abeba, the brewery’s shareholders approved and lauded BGI’s, the major shareholder of the company, bid in their fourth annual general meeting held yesterday at Axum Hotel.

As a strategic move to control a substantial market share in the northern parts of the country, BGI offered 4.45 billion Br for the 25pc shares owned by Dawit Gebregziabher and 28pc stake invested by the remaining shareholders.

Before the meeting, to facilitate the acquisition, the Company valuation was conducted by the international firm KPMG Management Consulting and was deemed to be worth 190 million dollars.

According to the valuation, BGI which has a 42pc stake in the company was meant to pay 2.55 billion Br to the remaining shareholders, but Raya’s board of directors and BGI slowed down for negotiation until they settled for a good deal.

Although the par value of each share was 1,000 Br, the negotiation resulted in paying the shareholders out  7.5 folds of the initial par value, amounting to 7,425 Br a share. It would take at least half a century for the shareholders to earn such returns.

“We are not selling a company or a factory,” said Zafu Eyessuswork, board member of Raya. “We are transferring shares.”

During yesterday’s general assembly, Raya’s board of directors reported BGI’s offer to the shareholders and discussed the procedures to be followed for transfer if the shareholders agree.

Share transfer is expected to begin this week, according to the board of directors.

“The vibe demonstrated that everyone would sell their shares,” said Zafu. “If some would not, their returns can’t exceed five percent of the total amount.”

During the meeting, the management of BGI expressed willingness to work with individuals who prefer to keep their shares in the company.

Dawit Gebregziabher, a businessman who travelled through Sudan and Abu Dhabi, making millions and currently runs National Aviation, a private Ethiopian carrier, offering passenger & cargo air transportation services, will bag about 1.9 billion Br as he already agreed to sell his shares to BGI.

He needed the cash for the Boeing aircrafts he is aspiring to buy for his aviation company, according to sources. But he refrained from giving any comment on the issue when approached by Fortune.

Raya- which is yet to declare a profit- started operations four years ago after being founded by 58 individuals including Gebretsadikan Gebretinsae (Lut. Gen.), current board chairperson of the brewery and Ambachew Abreha, former head of the then Ethiopian Shipping Lines, in 2010.

Additionally, prominent individuals such as Selome Tadesse, former general manager of the then Ethiopian Radio & Television Enterprise and Zafu, a veteran in the financial sector as well as board chairman of United Bank, were founding shareholders of the company.

The Company took three years to construct a brewery with a cost of a billion Birr in Bohera Mountains, south of Maichew Town- 667Km from Addis Abeba.

With a significant market share in Tigray Regional State, Raya has managed to improve its sales by three folds in the past three years, reaching over half a billion Birr in the 2015/16 fiscal year. Nonetheless, its losses have bumped by 32 million Br to 104 million Br.

To buck this trend, the Brewery has launched the first phase of its expansion project with a cost of around 75 million Br, aiming to boost its capacity to 600,000 hectolitres. Furthermore, in its second phase expansion project, it plans to increase the amount to 1.3 million hectolitres.

Known for brands such St George, Castel, Amber and the new Panache Lemon Beer, BGI, acquired by the French firm Groupe Castel, initially bought a 30pc share in Raya. Within three years, BGI managed to increase its stake by 12 percentage points.

Adding to its investment in Raya, BGI now owns breweries in Addis Abeba, Kombolcha and Hawassa. It also operates a winery and vineyard in Ziway.

“The new acquisition will give the company a new competitive edge over its competitors,” said a marketing expert who has consulted breweries in the country.

The Ethiopian brewery industry is ninety years old. Despite being aged, it has been controlled by a few state-owned breweries for a long time. However, since 1998, new global players have joined the market. BGI was the leading one after being privatised by the government.

Diageo, which acquired Meta Brewery with 225 million dollars, followed and Heineken after acquiring Bedele and Harar breweries for a 163 million dollar investment was next to join the industry.

“Now BGI’s move insinuates the end of privatisation and the dawn of a new stage- mergers and acquisition,” said the marketing expert.

Besides multinational players, local breweries including Raya, Habesha and Zebidar have also joined the market over the past half decade. Dashen Brewery which was established in 2000 and co-owned by Duet, a UK investment company and TIRET Corporate, is also performing well in the northern parts of the country.

Taking the largest share of the market, Heineken, brewer of Waliya, and BGI, produce four and three million hectoliters, respectively, while the smallest, Raya and Zebidar have 350,000 hectoliters and 500,000 hectoliters, correspondingly.

BGI dominates the capital’s market; on casual days the brand controls almost half of the local market until surpassed by Waliya Beer through lotteries.

“Two weeks ago the prize expired and, business returned to normal,” said a waiter at Tadesse Bizu Bar located at around Mesqel Flower, on the way to Dembel City Center from Agona.

Yet, a majority of her customers prefer Waliya and St George.

This recent acquisition, according to sources close to the case, would help BGI to make itself marketable for any other giant company that aspires to enter to the Ethiopian beer market, which remains untapped.

The per capita beer consumption in Ethiopia stands at 10 litres, which is far lower compared with neighbouring Kenya, whose population is twice lower than that of Ethiopia but has a per capita beer consumption of 12 litres.

SABMiller and Heineken are the two giant breweries which painted a picture of contrasting fortunes in Africa, the continent that has the fastest growth in beer demand.

Source : Fortune

Tags: BGI Ethiopia,, Raya Beer,, KPMG Management Consulting,, Raya Brewery,, Zafu Eyessuswork,, Dawit Gebregziabher,, National Aviation,, Selome Tadesse,


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