Heineken’s South Africa Move Signals Resilience After Booze Bans

Heineken NV’s approach to buy South Africa’s largest wine and spirits maker undermines one complaint about the country’s response to the Covid-19 pandemic: that bans on alcohol sales drive away investment.

The world’s second-largest brewer has approached Distell Group Holdings Ltd. about a possible acquisition of most of the business, which is valued at almost $2.5 billion following a share-price surge. The two sides are now in discussions and the South African firm is considering options, a spokesman said on Tuesday.

If a deal goes ahead, the investment will give a boost to an industry that’s battled with the fallout of three government booze bans since the coronavirus crisis began last year. The prohibitions have led to warnings from drinks makers that crucial investments are being delayed or scrapped, while Anheuser-Busch InBev NV’s South African division is taking legal action.

Even Heineken said in August that it stopped work on a 6 billion-rand ($428 million) brewery because of the policy. The company couldn’t immediately be reached for comment on the status of the plan.

“This is a vote of confidence in the country and the industry, despite being affected by a significant 20 weeks of bans,” said Lucky Ntimane, convener of the National Liquor Traders Council. “It speaks to the resilient nature of the alcohol industry in South Africa.”

Mild Lockdowns

The government’s rationale for imposing bans was to discourage large gatherings when the virus was spreading quickly and to ease the burden on hospitals. The most recent stoppage ended in February, but rising case numbers have led to fears of a renewal.

Yet while there are very few examples of other countries taking this measure -- and none for as long -- South Africa’s other recent steps to contain the virus have been relatively mild. And with a vaccination rollout underway after several delays, locals are optimistic an end to the pandemic could finally be in sight.

“Heineken’s primary focus has been Europe, where lockdowns have gone on significantly longer than in South Africa,” said Alec Abraham, an analyst at Sasfin Securities in Johannesburg.

Distell also gets a significant amount of business from international markets, where revenue grew in double digits in the second half of 2020 while domestic sales were flat. The company’s biggest product is wine, which South Africa exports around the world.

©2021 Bloomberg L.P.

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