A case analysis of Heineken, NBL and Distell
Proposed merger and acquisitions
Monopolies are bad as it leads to the accumulation of most of the power, and wealth to one major company.
Undoubtedly today we live in a time of significant economic change. Mergers and acquisitions have become common business tools, implemented by thousands of companies in world.
The Namibian Competition Commission (NaCC), under section 22 of the Competition Act, 2003 (Act No. 2 of 2003) is to safeguard and promote competition in the Namibian market. Parties with serious intention to enter into Mergers & Acquisitions required in terms of Section 44(1) of the Act to notify the Commission of the proposed merger (www.nacc.com.na).
Heineken N.V. is a Dutch multinational brewing company. As of 2019, Heineken owns over 165 breweries in more than 70 countries. It produces 348 international, regional, local and specialty beers and ciders. The company has Profit Margin (PM) of 5.5 %, which can signify that it executes well on its competitive strategies and has good control over its expenditures. This is normal as compared to the sector average. Similarly, it shows Operating Margin (OM) of 13.91 %, which suggests for every 100 dollars of sales, it generated a net operating income of 0.14. The return on total asset (ROA) of 3.99 % which means that it generated profit of US$3.99 on every US$100 spent on asset. This is normal as compared to the sector average. Similarly, it shows return on equity (ROE) of 9.0 %, meaning that it generated $9.0 on every $100 dollars invested by stockholders. Heineken manages its routine affairs as well as how well it operates its assets and liabilities. Global balanced footprint with growth potential 70 Countries, 160 Breweries, 300 Brands, 241mhl Consolidated Beer Volume and 54% of profit from developing market (http://www.heineken.com). Heineken has wide international presence through a global network of distributors and breweries and highly respected brand. It is not a Fly by night.
Namibia Breweries is Namibia’s market leader in beverage manufacturing and have a significant share of the region’s premium beer category. Operating profit increased by 4% to N$358 million. NBL’s debt-to-equity ratio remained healthy at 28.3% (2021: 34.1%). The group EPS 180.70 whilst HEPS 178.20. The group perform very well. Consolidated net revenue increased by 0.1% from N$2 646 million to N$2 649 million for the year ended 30 June 2021 (https://www.nambrew.com). Distell, a global business with roots in South Africa, produces and markets a diverse portfolio such as wineries & breweries amongst others. Group revenue increased by 26% to R28,3 billion on 26,3% higher volumes. Revenue excluding excise duty was up by 24%. The consolidated financial statements, headline earnings increased by 302. The financial position of an entity as at 30 June 2021 delivered solvent position. Therefore, NBL and Distell Namibia will join a giant in the market. A Combination of these businesses results in better sales opportunities. Both entities demonstrated quality and strong leadership.
Furthermore, Heineken NV has offered to buy Ohlthaver & List Group of Companies (O&L)’s 50.01% stake in NBL Investment Holdings (Proprietary) Limited, the controlling shareholder with a 59.4% shareholding in NBL. This means total acquisition and not a merger should the Namibian Competition Commission approve the proposal. Economic growth continues due to the growing investment in private equity and the untapped markets. Furthermore, the Namibian Competition Commission has to be notified in advance about any proposed merger and acquisition in order to assess the impacts to the consumer.
Protection
This is in attempt to protect the customer from unnecessary mergers and acquisition which can be dangerous. The commission has the right to stop any merger and acquisition which poses a major threat to the consumer’s welfare. In the case of Heineken’s acquisitions, the primary objective is to attain synergy and to birth a more resilient entity.
The Namibian Breweries Limited and Distell Namibia are currently dominating the industry in Namibia. The acquisitions of NBL and Distell without affecting the brand names will enhance synergy. This means that NBL and Distell will exist and continue their operations but they have to work under acquirer name and their terms. The main objective of acquisition is to improve present performances, decrease the competition in the market, to gain technology and expertise and economic scale.
This is a good acquisition for parties as it will help the conglomerate to fill in gaps in the Namibia, get better access to emerging markets and also strengthen its presence in the domestic market. A good opportunity to promote Namibian products, services and destinations, regionally and internationally. At the same time, it paves the way for investors who want to expand into new geographical regions. To be true, the rise of multinational corporations from emerging markets creates new sources of FDI. This is all the more important as, traditionally, foreign investors concentrate in capitals, often leaving other countries the mainstream of economic development. In the end, all investment is local, hence local opportunities need to be brought to the attention of investors, and the local regulatory and business environment needs to be competitive.
In conclusion, the acquisition of NBL and Distell Namibia will lead to monopoly. Historically, mergers and acquisitions tend to result in job losses. Due to monopoly, the customers depend only on one company for any specific product as there is no other company, which provides that product at that price range or quality.
Monopolies are bad as it leads to the accumulation of most of the power, and wealth to one major company rather than nearly equal distributorship of wealth and power among the various companies. Monopoly can lead to a burden on the customers due to high product prices, cheap quality products, and other unfair business practices.
Therefore, the Namibian Competition Commission (NaCC) should sate as part of an approval condition that no retrenchments for a period of time or whether there is scope to set up a fund to up-skill retrenched employees and to facilitate alternative work opportunities for them.
The Namibian Competition Commission (NaCC), under section 22 of the Competition Act, 2003 (Act No. 2 of 2003) is to safeguard and promote competition in the Namibian market. Parties with serious intention to enter into Mergers & Acquisitions required in terms of Section 44(1) of the Act to notify the Commission of the proposed merger (www.nacc.com.na).
Heineken N.V. is a Dutch multinational brewing company. As of 2019, Heineken owns over 165 breweries in more than 70 countries. It produces 348 international, regional, local and specialty beers and ciders. The company has Profit Margin (PM) of 5.5 %, which can signify that it executes well on its competitive strategies and has good control over its expenditures. This is normal as compared to the sector average. Similarly, it shows Operating Margin (OM) of 13.91 %, which suggests for every 100 dollars of sales, it generated a net operating income of 0.14. The return on total asset (ROA) of 3.99 % which means that it generated profit of US$3.99 on every US$100 spent on asset. This is normal as compared to the sector average. Similarly, it shows return on equity (ROE) of 9.0 %, meaning that it generated $9.0 on every $100 dollars invested by stockholders. Heineken manages its routine affairs as well as how well it operates its assets and liabilities. Global balanced footprint with growth potential 70 Countries, 160 Breweries, 300 Brands, 241mhl Consolidated Beer Volume and 54% of profit from developing market (http://www.heineken.com). Heineken has wide international presence through a global network of distributors and breweries and highly respected brand. It is not a Fly by night.
Namibia Breweries is Namibia’s market leader in beverage manufacturing and have a significant share of the region’s premium beer category. Operating profit increased by 4% to N$358 million. NBL’s debt-to-equity ratio remained healthy at 28.3% (2021: 34.1%). The group EPS 180.70 whilst HEPS 178.20. The group perform very well. Consolidated net revenue increased by 0.1% from N$2 646 million to N$2 649 million for the year ended 30 June 2021 (https://www.nambrew.com). Distell, a global business with roots in South Africa, produces and markets a diverse portfolio such as wineries & breweries amongst others. Group revenue increased by 26% to R28,3 billion on 26,3% higher volumes. Revenue excluding excise duty was up by 24%. The consolidated financial statements, headline earnings increased by 302. The financial position of an entity as at 30 June 2021 delivered solvent position. Therefore, NBL and Distell Namibia will join a giant in the market. A Combination of these businesses results in better sales opportunities. Both entities demonstrated quality and strong leadership.
Furthermore, Heineken NV has offered to buy Ohlthaver & List Group of Companies (O&L)’s 50.01% stake in NBL Investment Holdings (Proprietary) Limited, the controlling shareholder with a 59.4% shareholding in NBL. This means total acquisition and not a merger should the Namibian Competition Commission approve the proposal. Economic growth continues due to the growing investment in private equity and the untapped markets. Furthermore, the Namibian Competition Commission has to be notified in advance about any proposed merger and acquisition in order to assess the impacts to the consumer.
Protection
This is in attempt to protect the customer from unnecessary mergers and acquisition which can be dangerous. The commission has the right to stop any merger and acquisition which poses a major threat to the consumer’s welfare. In the case of Heineken’s acquisitions, the primary objective is to attain synergy and to birth a more resilient entity.
The Namibian Breweries Limited and Distell Namibia are currently dominating the industry in Namibia. The acquisitions of NBL and Distell without affecting the brand names will enhance synergy. This means that NBL and Distell will exist and continue their operations but they have to work under acquirer name and their terms. The main objective of acquisition is to improve present performances, decrease the competition in the market, to gain technology and expertise and economic scale.
This is a good acquisition for parties as it will help the conglomerate to fill in gaps in the Namibia, get better access to emerging markets and also strengthen its presence in the domestic market. A good opportunity to promote Namibian products, services and destinations, regionally and internationally. At the same time, it paves the way for investors who want to expand into new geographical regions. To be true, the rise of multinational corporations from emerging markets creates new sources of FDI. This is all the more important as, traditionally, foreign investors concentrate in capitals, often leaving other countries the mainstream of economic development. In the end, all investment is local, hence local opportunities need to be brought to the attention of investors, and the local regulatory and business environment needs to be competitive.
In conclusion, the acquisition of NBL and Distell Namibia will lead to monopoly. Historically, mergers and acquisitions tend to result in job losses. Due to monopoly, the customers depend only on one company for any specific product as there is no other company, which provides that product at that price range or quality.
Monopolies are bad as it leads to the accumulation of most of the power, and wealth to one major company rather than nearly equal distributorship of wealth and power among the various companies. Monopoly can lead to a burden on the customers due to high product prices, cheap quality products, and other unfair business practices.
Therefore, the Namibian Competition Commission (NaCC) should sate as part of an approval condition that no retrenchments for a period of time or whether there is scope to set up a fund to up-skill retrenched employees and to facilitate alternative work opportunities for them.
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