A Kenyan beer distributor, Bia Tosha, filed a lawsuit in Kenya’s High Court on 7 January 2026 to block Diageo plc’s planned $2.3 billion sale of its 65 % stake in East African Breweries (EABL) to Japan’s Asahi Holdings. The court action seeks to halt the transaction, arguing that a pending dispute dating back to 2016 could affect the sale’s value and completion.
The deal, announced in December 2025, values EABL at $2.3 billion and transfers Diageo’s 65 % shareholding—held through Diageo Kenya Limited—to Asahi. Diageo’s strategy for the sale is to divest a non‑core asset, strengthen its balance sheet, and meet its target leverage ratio of 2.5‑3.0 times earnings. Asahi views the acquisition as its largest investment in an African alcohol business and aims to preserve local brands while expanding its own portfolio.
Bia Tosha’s lawsuit is grounded in a contract dispute and alleged anti‑competitive practices that began in 2016. The distributor claims it could recover up to $300 million if the sale proceeds, arguing that the transaction would prevent it from enforcing a judgment against Diageo in Kenya.
EABL’s financial performance in the year ended 30 June 2025 shows a 12 % increase in profit after tax to KES 12.2 billion and a 4 % rise in revenue to KES 128.8 billion. In the first half of FY2025, the company reported a 19.6 % profit increase to KES 8.1 billion, driven by currency gains, lower finance costs, and stable demand for its flagship Tusker brand, while facing headwinds from rising input costs and counterfeit alcohol.
Diageo’s own first‑half FY2025 results revealed 1 % organic net sales growth, with four of its five regions expanding sales. The company emphasized its focus on returning to a healthy leverage ratio and highlighted the EABL sale as a key step in its balance‑sheet cleanup strategy.
Management comments underscored the strategic intent behind the transaction. Interim CEO Nik Jhangiani said the deal “delivers significant value for shareholders and accelerates our commitment to strengthen our balance sheet.” EABL Group Chairman Dr. Martin Oduor‑Otieno noted the company’s “strong topline growth and double‑digit profit expansion” while acknowledging external pressures such as inflation and counterfeit alcohol.
Market reaction to the lawsuit was immediate: Diageo’s shares fell 2.1 % in early trading on 7 January 2026, and EABL shares slipped 0.5 %. Investors reacted to the legal uncertainty that could delay or derail the sale, potentially affecting Diageo’s cash‑flow plans and exposing the company to additional legal costs and regulatory scrutiny.
The lawsuit introduces a significant risk to Diageo’s exit strategy from the East African beer market. A successful challenge could postpone the transaction, delay the expected proceeds, and increase legal expenses. For Asahi, the outcome will determine whether it can secure a major foothold in Africa, while EABL’s continued operation under its current ownership would preserve its market position amid ongoing regulatory and competitive pressures.
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