DISTELL GROUP LIMITED - Acquisition of Best Global Brands Limited

Acquisition of Best Global Brands Limited

Distell Group Limited 
Incorporated in the Republic of South Africa 
(Registration number 1988/005808/06) 
Share code: DST  
ISIN: ZAE000028668 
(“Distell” or “the Company”) 
 
ACQUISITION OF BEST GLOBAL BRANDS LIMITED 
 
1. Introduction 
Distell shareholders are advised that the Company’s wholly owned subsidiary, Distell International 
Holdings Limited (“DIHL”), has completed the acquisition of 26% of the ordinary shares of Best 
Global Brands Limited (“BGB”) for USD54.6 million from Hawksford Trustees Jersey Limited, in its 
capacity as trustees of the Furlong and Octane Trusts (“Sellers”) (“Phase 1”).  The Furlong and 
Octane Trusts, of which the respective beneficiaries are the Kieswetter and Bell families, collectively 
own the remaining 74% in BGB.   
 
DIHL has also entered into an agreement with the Sellers to acquire the remaining 74% of the 
ordinary shares of BGB, which will become effective no earlier than the end of 2019 once certain 
operating hurdles are achieved and conditions precedent to closing are fulfilled or waived (“Phase 
2”).  
 
(collectively the “Transaction”). 

2. Overview of BGB 

BGB is the holding company of a group of companies which own, manufacture and distribute the 
fast growing mainstream “Best” spirit brand in countries throughout Africa. The Best brand achieved 
volumes in excess of 30 million litres for the twelve months ending 30 June 2017 with Best whisky 
and Best cream comprising the largest proportion of those volumes. Best is the market leader in the 
mainstream spirits category in Angola and has a strong and growing presence in Nigeria, Kenya and 
Zambia. 
 
3. Strategic rationale 

The acquisition of the strategic interest in BGB will enable the Distell group to advance its strategy of 
becoming the leading Spirits, Wine and RTD group across Africa. 

- Best is a well-established pan-African brand founded in 1998 and is the leading mainstream 
  spirits brand in both whisky and cream in Angola and is the leading mainstream cream spirits 
  brand in Nigeria. The brand is experiencing strong growth in various other African countries most 
  notably Kenya and Zambia. 
 
- Best’s market leading positions in Angola and Nigeria are underpinned by established routes-to-
  market in these countries. 
 
- BGB operates modern state of the art production facilities in Angola and Nigeria which provide a 
  competitive advantage in both cost of production and speed to market.  
 
- BGB is a profitable and cash generative group and the acquisition will step-change Distell’s 
  African division by providing scale and efficiency in the spirits category.  
     
BGB and Distell expect the Transaction to generate significant synergies in the short to medium-term 
in procurement, route-to-market and production, which will unlock further value for both parties. 

 
4. Key terms of the Transaction 

4.1 Phase 1 

In terms of the Phase 1 agreement DIHL has acquired 26% of the ordinary shares of BGB for an 
upfront purchase consideration of USD54.6 million. The payment of the upfront purchase 
consideration is subject to a clawback or top-up once closing accounts have been finalised and the 
net debt and working capital of BGB at closing have been confirmed.  A further deferred purchase 
consideration payment of USD15.2 million is due should BGB’s Angolan operations obtain an import 
duty waiver on the importation of raw materials into Angola within a period of 12 months from 
closing. 
 
As part of the Transaction, DIHL will appoint two directors to the board of BGB, one of which being 
the finance director.  
 
The Nigerian operations and the Kenya export business will remain separate from BGB until such 
time as the Nigerian operations are restructured subject to obtaining approval from the Nigerian 
competition authorities and BGB obtains approval from the Kenyan competition authorities to 
acquire the Kenya export business. Upon completion, which is expected within the next six months, 
these businesses will be integrated into BGB.  
 
4.2 Phase 2 
 
In terms of the Phase 2 agreement, DIHL will purchase the remaining 74% of the ordinary shares in 
BGB once certain operating hurdles are achieved and conditions precedent are met. The purchase 
consideration of Phase 2 will be determined based on a 9.3x multiple of BGB’s last 12 month after 
tax operating performance. The operating hurdles will be measured every six months from 30 June 
2019 to 30 June 2022 against agreed upon criteria in relation to inter alia i) volumes delivered by the 
Angola operations ii) externalisation of cash remittances from the Angola operations to other group 
companies and iii) minimum group profitability margins being achieved. The hurdles have been put 
in place for the benefit of both DIHL and the Sellers to ensure that the business is operating 
sustainably when Phase 2 is implemented.  
 
65% of the Phase 2 purchase consideration will be paid upon closing of Phase 2 with the remaining 
35% being  deferred subject to certain hurdles being met within the earlier of three years of closing 
or 30 June 2023. 
 
5. Funding and financial impact 

Distell will fund the acquisition consideration from internal cash resources.  The Transaction is 
expected to be accretive to Distell’s headline earnings per share from the first year. 
 
6. Net assets and profits of BGB 

BGB is a newly established group following a restructuring of the business. BGB’s pro forma profit 
after tax for the period ended 31 March 2016 is estimated at USD33 million. This estimation was 
derived by applying the relevant income tax rates across the territories BGB operates in to the pro 
forma operating profit of BGB for the period ended 31 March 2016, which was verified in accordance 
with IFRS during due diligence. BGB’s net asset value at closing is expected to be USD7 million, it 
being noted that tangible and intangible assets were not fair valued when BGB was constituted. 

7. Effective date and Conditions precedent to the Transaction  

Phase 1 is not subject to any conditions precedent and the effective date is 28 July 2017.  
 
Phase 2 is subject to inter alia the following conditions precedent: 

    -  Obtaining all regulatory approvals to the extent required; 
    -  Distell concluding a successful equity capital raising or obtaining the necessary funding to 
       settle the Phase 2 purchase consideration; and 
    - No material adverse change having occurred in Angola or any other territory comprising 
       more than 20% of BGB’s turnover.  
        
8. Categorisation 

The aggregate consideration payable under Phase 1 and 2 of the Transaction is capped at R8.6 billion 
and the Transaction is classified as a Category 2 transaction in terms of the Listings Requirements of 
the JSE. 
 
 
28 July 2017 
 
 
Legal advisor 
Cliffe Dekker Hofmeyr Inc. 
 
Due diligence advisor 
PriceWaterhouseCoopers Inc.  
 
Communications advisor 
FTI Consulting 
 
Sponsor and Merchant Bank 
Rand Merchant Bank (A division of FirstRand Bank Limited) 
                                                           
 

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