India’s Varun Beverages to acquire South Africa’s BevCo

RMB advises on sale of BevCo in a landmark Indo-Africa deal

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Representational image. Photo Linkedin

India-listed Varun Beverages Limited (VBL), the largest PepsiCo bottler outside of the US and China, entered into an agreement to acquire 100% of the shares in The Beverage Company Proprietary Limited (BevCo).

Rand Merchant Bank (RMB) acted as sole financial advisor to BevCo and selling shareholders, including a Private Equity Fund managed by The Rohatyn Group (post the completed merger of Ethos Private Equity with The Rohatyn Group in April 2023) and Nedbank Private Equity, in a deal with an enterprise value of R3 billion (South African Rand). 1 South African Rand (R) roughly equals Rs 4.33.

BevCo is one of the largest carbonated soft drinks producers in Southern Africa. Their portfolio consists of the recognizable brands Jive, Coo-ee and Reboost. BevCo also bottles and distributes PepsiCo-branded non-alcoholic beverages in South Africa and has five manufacturing facilities in the country, in addition to operations in Lesotho, Eswatini, Namibia, and Botswana.

“Having invested in 2017, The Rohatyn Group’s Africa Private Equity team together with our partners and the management team have built a focused non-alcoholic beverage platform. We executed our original investment thesis over a seven-year period and today the consolidated BevCo is in excess of three times the size and continues to grow its market share organically. VBL brings significant resources and expertise to invest in BevCo’s product offering and grow PepsiCo’s brands in Southern Africa, while expanding their presence on the continent,” says Glynn Potgieter, managing director at The Rohatyn Group.

There are always multiple challenges with cross-border transactions, in this instance including the requirement for compliance with both the Indian Stock Exchange and South African regulations. Regulation in India required a restructure of the BevCo group as well as the transfer of its debt facilities and subsequent deregistration/liquidation of more than ten entities within the group structure.

This had implications on what would normally be a standard warranty and indemnity insurance policy. The transaction showcases RMB’s advisory capability in successfully navigating complex cross-border transactions and ability to access international buyers for high quality South African assets.

In addition to the corporate finance advisory role to BevCo, RMB’s South Africa and India teams assisted with refinancing the existing debt within BevCo as well as providing incremental acquisition finance for the transaction, in addition to facilitating the flows and foreign exchange conversion for the deal. This demonstrates RMB’s expertise and comprehensive solutions offering across the Indo-Africa corridor. With a footprint and expertise based both in South Africa and India, RMB can support clients on both sides of the corridor to enable seamless end-to-end transactions.

“The Indian market reacted extremely positively with VBL’s share price increasing in excess of 10% and reaching an all-time high on the day the transaction was announced. The transaction represents a significant investment and an important vote of confidence in South Africa by a large global player in the sector,” says Gareth Armstrong, corporate finance executive at RMB.

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