The competition regulator in Kenya has permitted UAE’s B Commodities’s acquisition of 98.56% in Lipton Teas and Infusion, setting the stage for one of the most watched M&A deals in the East African region this year.
The authority determined that prior to the impending merger, Lipton has a market share of 6%, which will push the acquirer’s market share to 10.7% – leaving 89.3% of the market to other competitors in the tea sector.Other formidable competitors are the Kenya Tea Development Agencies (KTDA) which owns 48.8% of the market share, Eastern Produce Kenya Ltd. with 5.6%, and Williamson Tea with 4.3%.Kenya produces 450 million kilograms of tea annually, raking in KSh 163 billion in exports and local sales worth KSh 22 billion – according to data from the Agriculture and Foods Authority.
“The transaction, therefore, qualified as a merger within the meaning of sections 2 and 41 of the Competition Act CAP 504. Premised on the above, the Authority approved the proposed acquisition of 98.56% of the issue share capital of Lipton Teas and Infusions Kenya PLC by B Commodities ME (FZE) unconditionally,” CAK stated.
The Authority has also assessed that the merger will not lead to any employment losses, assuring all 9,715 employees at Lipton Teas and 405 employees of Limuru Tea that they will be retained even after the acquisition. The sale of its shares at the tea processor positions Lipton Group to focus on brand management and improvement of value-addition.
The Asset and The Buyer
The estates’ sale has been challenged by local communities citing they were not informed of the proposed transaction. They said that they offered to purchase the estates through cooperative societies but Lipton overlooked them and offered to sell them to B Commodities, a subsidiary of Sri Lankan company called Browns Investments PLC.
Lipton Tea announced in May this year that it planned to sell off tea estates it owned across the region including those in Tanzania and Rwanda. Sri Lanka-based Browns Group acquired Lipton’s investments in Tanzania – aiming to produce 87 million kilograms of black tea annually. Browns’ estates across the world currently stand at 40,000 hectares and it produces 43 million kilograms of black tea. It has also acquired various tea farms in Kenya’s Rift Valley region. The company also acquired 51.99% of Limuru Tea and 100% of shares in Lipton’s Rwandan properties.
Lipton Teas came into existence in 1890 with its estates in Kenya dating back as early as 1914. As it plans to change its business model, the company has pledged to re-invest its proceeds in the region to boost the local economy. Like many tea companies with colonial origins, Lipton estates have been scrutinized as ‘arenas of injustice’ – with local communities claiming that these estates are situated on stolen lands