Diageo is taking full control of the South African traditional sorghum beer company United National Breweries.
The world’s largest spirits maker already owns 50% of the business and is paying up to $36m (£24m) to its partner Pestello Investments for the remainder, with an initial payment of $22m and a potential earn-out payment of a maximum of $14m.
Sorghum beer, a traditional drink of the Zulu people, contains up to 8% alcohol, is brewed from the grain sorghum and fermented with lactic acid. Commercially, sorghum beer is often sold with the fermentation process still ongoing. One brand of sorghum beer is the South African version of Guinness, a brand which Diageo also owns.
Diageo bought its original stake in UNB, the leading sorghum beer business in South Africa, in January 2013, also for $36m. The deal needs to be approved by the national competition authority.
Phil Carroll, an analyst at Shore Capital, said: “This transaction will give Diageo control of the leading traditional sorghum beer business in South Africa, including the ability to make investment decisions to support the continued growth of United National Breweries’ brands in the sorghum beer category.
“This is a small transaction and is not material to the Africa division’s or the group’s performance but is interesting to the extent of the valuation paid and seeing Diageo take the opportunity to continue to build its asset base in Africa.”
Last month, Diageo hosted a meeting in the City outlining its plans for Africa, which accounts for 13% of its total sales.
