DGE Diageo Plc

By Ed Ballard 

LONDON---Drinks companies Diageo PLC and Heineken NV on Wednesday announced an exchange of emerging-market brewing assets in a deal that will result in a profit for Diageo of GBP440 million ($671 million).

London-based Diageo is selling its stakes in brewing ventures in Jamaica and South-East Asia to Heineken and buying out the Dutch firm's stake in a Ghanaian drinks company. The companies have struck licensing agreements for their respective brands in Jamaica and Ghana.

The deal, which Diageo and Heineken said will bring "increased focus to their respective beer businesses", follows the termination of a similar partnership in South Africa.

"Our close collaboration with Diageo has been very productive over the years and I would like to thank them for their valued partnership," said Heineken Chief Executive and Chairman Jean-François van Boxmeer.

It also coincides with a landmark in the drinks industry's recent consolidation wave. Anheuser-Busch InBev NV on Wednesday revealed its plan to buy SABMiller PLC in a potential combination of the world's two largest brewers.

In the three-part deal, Diageo has sold its 57.9% stake in Desnoes & Geddes Ltd., the Jamaican brewer of Red Stripe lager and Dragon stout, to Heineken, which already held 15.5% in D&G and now controls over 73%.

Diageo--known for its Johnnie Walker whisky and Smirnoff vodka--has also sold 49.99% of GAPL Pte Ltd., which distributes stout beer in Singapore and Malaysia, handing Heineken full ownership.

"Having greater commercial control in the important regions of Southeast Asia and the Caribbean will allow us to maximize the strong potential of our brands in these growth markets," Mr. Van Boxmeer said.

At the same time, Diageo acquired Heineken's 20% stake in Guinness Ghana Breweries Ltd., increasing its shareholding to 72.4%. The move comes on the heels of Diageo's plan to increase its stake in Guinness Nigeria as it seeks to wield more control over its African business.

Wednesday's transaction "provides a strong route to consumer for Guinness which will grow the brand in these markets," Diageo Chief Executive Ivan Menezes said.

Diageo will receive a net payment of $780.5 million in cash, which it will use to pay down debt, and record an exceptional profit of around GBP440 million after tax.

Write to Ed Ballard at ed.ballard@wsj.com

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(END) Dow Jones Newswires

October 07, 2015 05:38 ET (09:38 GMT)

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