Kenya competition regulator seeks reserve fund in Diageo’s EABL sale
Proposed KES15.5 billion safeguard and refrigeration conditions deepen regulatory standoff over East Africa’s major brewing deal.
KENYA – The Competition Authority of Kenya (CAK) has placed the proposed US$2.6bn (KES388.2 billion) sale of a 65% stake in East African Breweries PLC (EABL) by Diageo to Japan’s Asahi Group Holdings under a regulatory roadblock after it demanded additional conditions before approving the transaction.
The CAK has required the establishment of a US$115m (KES15.5 billion) ring-fenced reserve, equivalent to 4% of the transaction value. The authority initially proposed a reserve of 10% before revising the requirement downward.
The fund would cover potential third-party claims, disputes and liabilities linked to EABL, including an estimated US$ 61.87m (KES8 billion) claim by Bia Tosha Distributors and a US$18.92m (KES2.45 billion) claim by JILK Construction related to the Kisumu brewery project.
CAK pushes for protection of third-party claims
The Competition Authority of Kenya says it is acting to safeguard third parties from potential exposure to unresolved liabilities following the change in ownership.
EABL, Diageo and Asahi have rejected the condition, arguing that the CAK has exceeded its legal mandate and that existing disputes should remain within the jurisdiction of the courts rather than being embedded in merger approval terms.
The disagreement has contributed to a prolonged delay in finalising the transaction, despite regulatory approvals already granted in other East African markets, including Uganda and Tanzania.
The Competition Authority of Kenya has also introduced a condition requiring that at least 20% of refrigeration space supplied to retail outlets be reserved for products not branded by EABL or Asahi.
The authority argues that the combined distribution network and company-owned refrigeration assets could allow the enlarged entity to restrict competitors’ access to retail visibility and cold storage, potentially distorting competition in the beverage market.
Access to refrigeration is a critical factor in the beverage industry, as chilled availability strongly influences consumer purchasing decisions for beer and other ready-to-drink products.
EABL, Diageo and Asahi have opposed the requirement, stating that market conditions will not change simply because of a shift in shareholder ownership.
The Competition Authority of Kenya has escalated the matter by seeking an advisory opinion from the Attorney-General on the scope of its merger-review powers.
The authority’s position has intensified tensions with the transaction parties, who continue to challenge both the reserve fund requirement and the refrigeration access condition.
The proposed acquisition remains one of the largest transactions in Kenya’s consumer goods and beverage sector and would significantly expand Asahi Group Holdings’ footprint in Africa through EABL.
EABL operates a broad portfolio of beer brands across East Africa and maintains a strong manufacturing and distribution network across the region.
The regulatory dispute now extends beyond corporate ownership, with potential implications for how competition authorities assess distribution systems, retail infrastructure, supplier relationships and liability allocation in future mergers involving large consumer goods companies.
Until the legal and regulatory issues are resolved, the transaction remains stalled, with the brewing and wider beverage industry closely monitoring developments in one of the region’s most significant pending corporate deals.
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