Diageo unit angers SABMiller in Tanzania

27th Jul 2009 09:58

A unit of drinks giant Diageo, East African Breweries Limited (EABL), is set to buy a "substantial" interest in Tanzania's second largest brewer.The subsidiary, in which Diageo has a 50.03% stake, will pay an undisclosed sum for the holding in Serengeti Breweries Limited (SBL) after entering a conditional agreement on 16 July.SBL, maker of Serengeti Lager, currently accounts for 17% of the Tanzanian market by volume, and has grown market share by 10% over the last three years. In addition, EABL has decided to scrap its existing brewing and distribution agreement with Tanzania Breweries Limited (TBL), for the manufacture and sale of its brands in Tanzania. It said 'issues' have arisen between TBL, the sole and exclusive manufacturer and distributor of EABL products in Tanzania, and EABL, which are currently the subject of legal proceedings.The move has angered Diageo rival SABMiller, owner of almost 53% of TBL. EABL owns 20% of TBL.It says EABL's decision to bin the TBL deal was a breach of contract."TBL and SABMiller are seeking an injunction against EABL's actions and proposed transactions via a court application in the UK courts, pending the commencement of arbitration proceedings if the parties cannot resolve their differences amicably," SABMiller said in a statement.