Diageo Collects a Record EABL Dividend While Its Exit Stays Frozen

Kenya · MARKETS

Diageo is in line for a dividend of about Sh4.47 billion (US$34.6 million) from East African Breweries after the Nairobi-listed brewer reported record annual profit — cash the British group collects only because its roughly US$3 billion exit from East African drinks is still trapped in the Kenyan courts nearly eight months after it was signed.

A record year that pays the departing owner

East African Breweries Plc reported results for the year to June 2026 on Thursday. Net profit rose 49 percent to a record Sh18.2 billion (US$141 million). Net sales grew 13 percent to Sh146 billion (US$1.13 billion) from Sh128.8 billion, taking the brewer past US$1 billion of revenue for the first time in its history.

Group managing director and chief executive Jane Karuku put the result down to demand for mainstream spirits, growth in all three of the company’s markets and a sharp fall in financing costs after it cut debt by Sh6.2 billion (US$48 million) during the year. Kenya still supplies roughly 60 percent of group revenue, but Uganda grew 16 percent and Tanzania 44 percent. Sales of Kenya Cane, a low-priced spirit whose ginger, pineapple and coconut variants have spread quickly through Kenyan bars, drove a 30 percent jump in mainstream spirits.

The board responded by raising the total dividend 59 percent to Sh12.70 a share, from Sh8.00 the previous year. That is made up of a Sh4.00 interim paid in April and a Sh8.70 final recommended on Thursday, payable on 31 October 2026 to shareholders on the register at 19 October.

Where the EABL dividend comes from

Diageo still owns 65 percent of EABL, or roughly 514 million of the brewer’s 790.8 million shares, because the sale it agreed in December 2025 has not completed. Multiply that holding by the Sh8.70 final dividend and the British group’s entitlement comes to about Sh4.47 billion, or US$34.6 million at Thursday’s rate of 129.4 shillings to the dollar. On the same arithmetic its share of the Sh8.00 dividend a year earlier was about Sh4.1 billion.

Until the shares actually change hands, Diageo remains the legal owner and keeps every right that goes with the stake: dividends, voting control and the casting voice in the boardroom. A signed sale agreement does not by itself suspend any of that.

That is the awkward arithmetic of a delayed exit. Diageo has decided it no longer wants to own breweries in East Africa, yet every month the courts hold up the handover is another month in which the asset pays it. The better EABL trades, the larger the cheque.

The sale Diageo agreed and cannot yet complete

Diageo signed binding agreements in December 2025 to sell its 65 percent EABL holding to Asahi Group Holdings for US$2.354 billion (Sh304.6 billion), and separately to sell its 53.68 percent stake in UDV Kenya, a spirits producer and importer, for US$646 million (Sh83.6 billion). Together the two legs are worth about Sh388.2 billion, roughly US$3 billion.

Diageo has been the controlling shareholder of EABL since the early 2000s. In October 2022 it launched a partial tender offer to lift its stake from 50.03 percent to 65 percent at Sh192 (US$1.48) a share, and the offer closed oversubscribed in early 2023. Business Daily calculates that Diageo will make a profit of about Sh47.2 billion (US$365 million) on that incremental 14.97 percent block alone, which Asahi’s pricing values at roughly Sh69.9 billion (US$540 million).

It is that sequence — buying more of the company from local shareholders in 2022 and 2023, then selling the whole holding to a foreign buyer at a control premium in 2025 — that has generated most of the legal resistance.

Four petitions and a frozen share register

At least four separate actions have been brought against the transaction by minority shareholders, distributors and contractors. Three applications to freeze the deal have been dismissed, though the underlying disputes continue. Bia Tosha Distributors, a beer distributor locked in a commercial dispute with EABL’s Kenyan subsidiary since 2016, lost twice: on 9 April 2026, when Justice Bahati Mwamuye found no legal nexus, and again on 2 June, when Justice Gregory Mutai dismissed a fresh application with costs. On 17 June the same judge dismissed a bid by JILK Construction, holding that no nexus had been shown between its arbitral claim over three brewery refurbishment contracts and the share transfer.

The obstacle that still stands was filed at the High Court in Machakos by Christine Irungu, a Kenyan shareholder. She alleges that minority investors were denied material information when Diageo raised its stake to 65 percent in the 2022–23 tender, and that the Capital Markets Authority and the Competition Authority of Kenya failed to protect them. On 18 June Justice Josephine Mongare issued conservatory orders preserving EABL’s ownership, control and shareholding exactly as they stood, initially to a hearing on 2 July.

The matter has not been resolved since. By the start of July the dispute had reached Chief Justice Martha Koome, with the parties publicly at odds over how quickly it should be heard, and on 21 July the court rejected an attempt to have one side’s lawyers removed from the case. The share register remains frozen. Diageo had expected to complete between July and December 2026.

Kenya’s own stake in getting the deal done

The Kenyan state is not a neutral bystander. The National Treasury expects roughly Sh42 billion (about US$325 million) in capital gains tax when the sale completes, one of the largest single-transaction tax receipts in the country’s history. Business Daily, citing a person close to the deal, puts the range at Sh41.5 billion to Sh42 billion, equivalent to about 15 percent of Diageo’s gain over an initial investment it estimates at Sh30 billion (US$232 million).

So the government has a direct financial interest in a private transaction closing, set against domestic distributors and small shareholders who argue that a foreign owner bought cheaply from locals and is now selling expensively to another foreigner. For an outside investor the useful signal is not who wins the argument, but how long a Kenyan court can hold up a completed commercial agreement between two listed multinationals.

EABL is one of the Nairobi Securities Exchange’s largest and most widely held listings, so the uncertainty is felt well beyond the two parties. The brewer has consistently argued that the decade-old distribution dispute has no legal connection to a share sale agreed in London and Tokyo.

Asahi’s route into Africa

For Asahi the transaction is a first substantial move into Africa. It buys control of EABL’s breweries and distilleries in Kenya, Uganda and Tanzania along with brands including Tusker and Senator, in three markets where beer volumes are still growing. Japanese brewers face a shrinking, ageing home market, which is why several have spent the past decade buying operating businesses in faster-growing economies.

Diageo is not leaving the region altogether. The sale is paired with long-term licensing arrangements under which EABL, once Asahi-owned, continues to brew Guinness and to distribute Diageo spirits such as Johnnie Walker and Smirnoff. That is the shape of the wider pattern: European groups shed the capital-intensive plant while keeping the brand income, and Asian buyers take on the factories, the workforce and the local political exposure.

Where operational control of African consumer businesses ends up, and who keeps the brand rents, is a thread we follow in Africa: The New Scramble.

The pattern Latin American investors will recognise

Diageo is not leaving drink in East Africa. It is selling the breweries and keeping the brands, licensing Guinness, Johnnie Walker and Smirnoff back to the buyer. That is the same move European groups have been making in Latin America for years — shed the capital-intensive plant, keep the royalty stream. Diageo owns Don Julio and Buchanan’s and is a large presence in Mexico and Colombia, so it is worth watching whether the East African template travels.

The other lesson is about minority shareholders. A Kenyan retail investor with a petition in Machakos has held up a US$3 billion transaction for months. Anyone who has watched a Brazilian or Mexican tender offer get tangled in court will find the shape of this familiar.

What to watch

The first thing to watch is the Machakos petition. Until Justice Mongare’s conservatory orders are lifted or the case is decided, no shares can move. On the regulatory side the field has narrowed: Karuku said on Thursday that Uganda and Tanzania have cleared the deal, leaving Kenya’s Competition Authority as the only approval still outstanding. The second is the dividend itself: the Sh8.70 final is due on 31 October, and on current form Diageo will still be the shareholder receiving it.

For Diageo’s London investors the sale was framed as deusing and capital discipline, and the delay pushes that benefit further out. For Kenya, completion releases a Sh42 billion tax receipt and removes a cloud over a major index constituent. For the minority shareholders, the litigation is the only use they have.

Until something changes, the position stays where it is: a seller that wants out, a deal that cannot close, and a record dividend cheque made out to the party that is leaving.

Frequently Asked Questions

Sources

• Business Daily — Diageo set to pocket Sh4.47bn dividend on delayed EABL deal
• Business Daily — EABL raises dividend by 59pc as profits rise to Sh18.2bn
• Business Daily — Court freezes EABL stake sale as petitioner puts regulators under scrutiny
• Citizen Digital — Court dismisses petition seeking to stop EABL-Diageo shares deal
• EABL — High Court fast-tracks hearing on Diageo-Asahi deal

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