The proposed Sh388 billion sale of East African Breweries Limited (EABL) to Japanese brewer Asahi has placed the company’s business practices under intense scrutiny, with the Competition Authority of Kenya (CAK) refusing to allow the transaction to proceed without addressing concerns that could affect competitors, creditors and minority shareholders.
At the centre of the dispute is EABL’s powerful position in Kenya’s beer market. For years, the company has maintained a dominant share of beer sales, estimated at about 90 percent.
That position has been supported by a wide distribution network, exclusive sales arrangements, product placement deals and company-owned refrigeration equipment placed in retail outlets.
The issue now facing regulators is whether such arrangements have allowed EABL to maintain its dominance by limiting the space available to competing brands.
The CAK has raised concerns about the possible impact of these practices, particularly if Diageo completes its exit from EABL and leaves behind unresolved disputes.
One of the most important conditions imposed by the regulator is the requirement for EABL to set aside Sh15.5 billion in a reserve fund.
The money would be available to meet possible claims from third parties. The demand has become a major point of disagreement between the companies and the regulator, with Diageo and EABL arguing that the conditions are excessive.
However, the regulator’s concerns come against a background of existing disputes involving the brewer.For nearly a decade, EABL has been involved in a legal battle with Bia Tosha Distributors over distribution territories in Nairobi.
Bia Tosha had paid millions of shillings in goodwill for exclusive distribution rights before the relationship broke down.
The dispute eventually reached the Supreme Court, where orders protecting Bia Tosha’s territory were reinstated.
The distributor has pursued a claim estimated at about Sh8 billion for lost profits.Although a court rejected an attempt to stop the proposed sale on the basis of the dispute, that decision did not settle the underlying commercial claims.
Questions surrounding the distribution disagreement therefore remain relevant as the multinational prepares to transfer ownership.
Another major dispute involves JILK Construction, which is seeking about Sh2.45 billion over civil works linked to EABL’s Kisumu brewery project.
The matter has involved arbitration and other legal proceedings. Attempts to stop the Asahi transaction because of the dispute have not succeeded, but that does not mean the financial claim itself has disappeared.
EABL is also facing fresh competition concerns. A Heineken-owned company has complained to the CAK over what it says are restrictive distribution arrangements that give EABL significant control over distributors and pricing.
Such complaints are particularly significant in a market where one company already holds an overwhelming share.
The concerns are not limited to Kenya. COMESA previously investigated Diageo’s distribution practices in several African markets and found problems involving minimum resale prices, single-branding requirements and territorial restrictions.
Diageo settled the matter and paid a fine.That history explains why the CAK has sought a 20 percent refrigeration carve-out for rival beer brands.
The condition would require part of EABL’s cooler network to remain available to competitors. For the regulator, the issue is not simply about refrigerators.
It is about whether control of retail space and cold storage can be used to restrict consumer access to competing products.
The proposed sale has also raised questions about minority shareholders. Diageo increased its stake in EABL through a tender offer in 2022, presenting the move as part of its long-term commitment to the Kenyan market.
Only 14 months later, it was negotiating a sale of that stake to Asahi at a significantly higher valuation.
In other African markets where Diageo exited, minority shareholders were given mandatory buyout opportunities.
In Kenya, however, exemptions were obtained from similar requirements.
That has left ordinary investors holding about 35 percent of EABL without the same opportunity to exit alongside the controlling shareholder.
Shareholder Christine Irungu challenged the transaction in court, resulting in conservatory orders affecting the proposed sale. Her case adds another layer of uncertainty to a deal that was already facing regulatory resistance.
EABL has operated in Kenya for more than a century and remains one of the country’s most influential companies. But its size and market power also bring greater responsibility.
The current dispute is therefore bigger than the sale to Asahi. It raises fundamental questions about competition, corporate accountability, unresolved financial claims and the treatment of minority investors.
For Diageo, the proposed transaction represents a major opportunity to cash out of a valuable African business. For Kenya, however, the priority is ensuring that the exit does not leave competitors, creditors, shareholders or other affected parties carrying the consequences of disputes that existed before the sale.
The CAK’s intervention has therefore put the spotlight firmly on EABL. The company now has to confront questions about how its market dominance was built, how its distribution system operates and whether outstanding claims can be properly addressed before ownership changes hands.
The Sh388 billion transaction may be a commercial deal between two global brewing giants, but its consequences extend far beyond their boardrooms.
For regulators and other stakeholders, the central question is whether EABL’s long history of dominance can be allowed to continue without stronger safeguards for competition and accountability.
