Shares in drinks giant Diageo (DEO) were frothier today as it offloaded its majority stake in East African Breweries (EABL) to Japanese brewer Asahi Group Holdings (ASBRF) for $2.3 billion.
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Diageo Tackling Debt
The owner of Guinness and Johnnie Walker whisky said the sale includes its 65% shareholding in East African Breweries PLC, the largest beer business in East Africa, and its 54% shareholding in the Kenyan spirits business, UDVK.
Diageo said that the sale proceeds of $2.3 billion equate to a multiple of 17 times adjusted earnings before interest, tax, depreciation and amortization, resulting in an implied enterprise value for 100% of EABL of $4.8 billion.
In the fiscal year ended 30 June 2025, EABL reported net sales of $996 million and $258 million EBITDA.
Diageo said that the deal will de-lever its balance sheet by around 0.25 times, and was consistent with a strategy of ‘appropriate and selective disposals of non-core assets.’
Diageo moved to calm fans of the famous ‘black stuff’ drink by committing to enter into long-term licensing agreements with EABL to secure the continued production and distribution of Guinness, local spirits and ready-to-drink brands, as well as the distribution of Diageo international spirits.
The deal is also notable in that it represents the first time a major Japanese brewing business has made an investment of this size in an African alcohol beverage business.
Subject to regulatory approvals, the deal is expected to complete in the second half of 2026.
‘Drastic Dave’ is Here
The Diageo share price has stumbled this year – see below:
It has been hit with tariff hikes in the United States, its biggest market, high debt levels, cautious consumer spending and a move away from alcoholic drinks by younger people.
There has even been talk that it could be looking at spinning off its iconic Guinness brand.
Those decisions and others will now be made by former Tesco supermarket chief executive Dave Lewis, who will take up the role of Diageo CEO and Executive Director from January 1 next year. That follows the departure of Debra Crew in July.
Lewis is known as ‘Drastic Dave’ as in a previous role at Unilever (UL), the consumer goods giant, he was credited with turning round the business through cost-cutting and targeted marketing.
Is DEO a Good Stock to Buy Now?
On TipRanks, DEO has a Moderate Buy consensus based on 2 Buy and 3 Hold ratings. Its highest price target is $131. DEO stock’s consensus price target is $92.55, implying a 3.54% upside.
