Proposed merger and acquisitions …a case analysis of Heineken, NBL and Distell

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Proposed merger and acquisitions …a case analysis of Heineken, NBL and Distell
Proposed merger and acquisitions …a case analysis of Heineken, NBL and Distell

Africa-Press – Namibia. Undoubtedly, we live in a time of significant economic change. Mergers and acquisitions have become common business tools, implemented by thousands of companies in the world.

The Namibian Competition Commission, under section 22 of the Competition Act, 2003 (Act No. 2 of 2003), seeks to safeguard and promote competition in the Namibian market.

Parties with serious intention to enter into mergers and acquisitions are required in terms of Section 44 (1) of the Act, to notify the Commission of the proposed merger (www.nacc.com.na).

Heineken N.V is a Dutch multinational brewing company. As of 2019, Heineken owns over 165 breweries in more than 70 countries.

It produces 348 international, regional, local and speciality beers and ciders.

The company has a profit margin (PM) of 5.5%, which can signify that it executes well on its competitive strategies and has good control over its expenditures.

This is normal, compared to the sector average.

Similarly, it shows an operating margin (OM) of 13.91%, which suggests that for every 100 dollars of sales, it generated a net operating income of 0.14.

The return on total assets (ROA) of 3.99%, which means it generated a profit of US$3.99 on every US$100 spent on assets.

This is normal, compared to the average sector.

Similarly, it shows a 9.0% return on equity (ROE), meaning it generated US$9.0 on every US$100 dollars invested by stockholders.

Heineken manages its routine affairs as well as how well it operates its assets and liabilities.

Global balanced footprint with growth potential in 70+ countries, 160+ breweries, 300+ brands, 241mhl consolidated beer volume and 54% of the profit from the developing market (http://www.heineken.com).

Heineken has a wide international presence through a global network of distributors and breweries, and it is a highly respected brand.

It is not a fly-by-night.

Namibia Breweries is the country’s market leader in beverage manufacturing, and it has a significant share of the region’s premium beer category.

Operating profit increased by 4% to N$358 million.

NBL’s debt-to-equity ratio remained healthy at 28.3% (2021: 34.1%).

The group EPS is 180.70, whilst the HEPS is 178.20.

The group performs very well.

The consolidated net revenue increased by 0.1% from N$2 646 million to N$2 649 million for the year ended 30 June 2021 (https://www.nambrew.com).

Distell, a global business with roots in South Africa, produces and markets a diverse portfolio, such as wineries and breweries.

Group revenue increased by 26% to R28.3 billion on 26.3% higher volumes.

Revenue, excluding excise duty, was up by 24%.

The consolidated financial statements and headline earnings increased by 302.

The financial position of an entity as of 30 June 2021 delivered a solvent position.

Therefore, NBL and Distell Namibia will join a giant in the market.

A combination of these businesses results in better sales opportunities.

Both entities demonstrated quality and strong leadership.

Furthermore, Heineken NV has offered to buy Ohlthaver & List Group of Companies (O&L) a 50.01% stake in NBL Investment Holdings (Proprietary) Limited, the controlling shareholder with a 59.4% shareholding in NBL.

This means total acquisition – and not a merger – should the Namibian Competition Commission approve the proposal.

Economic growth continues due to the growing investment in private equity and the untapped markets.

Furthermore, the Namibian Competition Commission has to be notified in advance about any proposed merger and acquisition to assess the impacts on the consumer.

This is an attempt to protect the customer from unnecessary mergers and acquisitions, which can be dangerous.

The commission has the right to stop any merger and acquisition, which poses a major threat to the consumer’s welfare.

In the case of Heineken’s acquisitions, the primary objective is to attain synergy and to birth a more resilient entity.

The Namibian Breweries Limited and Distell Namibia are currently dominating the industry in Namibia.

The acquisitions of NBL and Distell, without affecting the brand names, will enhance synergy.

This means that NBL and Distell will exist and continue their operations, but they have to work under the acquirer’s name and their terms.

The main objective of the acquisition is to improve present performances and decrease the competition in the market to gain technology and expertise as well as economic scale.

This is a good acquisition for parties, as it will help the conglomerate to fill in gaps in Namibia, get better access to emerging markets and also strengthen its presence in the domestic market.

It is a good opportunity to promote Namibian products, services and destinations regionally and internationally.

At the same time, it paves the way for investors who want to expand into new geographical regions.

To be true, the rise of multinational corporations from emerging markets creates new sources of FDI.

Traditionally, foreign investors concentrate on capital, often leaving other countries in the mainstream of economic development.

In the end, all investment is local; hence, local opportunities need to be brought to the attention of investors and the local regulatory and business environment needs to be competitive.

In conclusion, the acquisition of NBL and Distell Namibia will lead to a monopoly. Historically, mergers and acquisitions tend to result in job losses.

Due to monopoly, customers depend only on one company for any specific product, as there is no other company that provides that product at that price range or quality.

Monopolies are bad, as they lead to the accumulation of most of the power and wealth to one major company rather than nearly equal distributorship of wealth and power among the various companies.

Monopoly can lead to a burden on the customers due to high product prices, cheap quality products and other unfair business practices.

Therefore, the Namibian Competition Commission should state as part of an approval condition that no retrenchments for some time or whether there is scope to set up a fund to up-skill retrenched employees and facilitate alternative work opportunities for them.

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