Namibia Breweries and Heineken International BV have reached an agreement to form a new joint venture for their combined beer, cider and RTD businesses in South Africa, to be called DHN Drinks. According to a joint statement, the new joint venture builds on the success of Brandhouse Beverages  (Pty) Limited, the parties' current cost-sharing joint venture in South Africa which was formed in July 2004. NBL will own 15.5% while Diageo and Heineken will each own 42.25% of DHN Drinks.

Each party will share in the profits of DHN Drinks in proportion to their shareholding. Brandhouse will continue to market and distribute the parties' products in South Africa.
Following the successful establishment of Brandhouse in 2004, the three partners have as a next step, put their brands together so as to maximise the mutual benefits of a joint portfolio of premium products.
For NBL, this investment means that it now has a tangible commercial interest in the sales and distribution of all brands that are part of this new profit sharing venture. The NBL's net investment in DHN Drinks is expected to be approximately N$44 million, reflecting NBL's 15.5% share in DHN Drinks.
In addition to a 15.5% share of the combined profits of the joint venture, NBL will receive a royalty of 6% of net sales value of its brands. NBL will have the right to appoint two of the eight directors of DHN Drinks.
DHN Drinks will have the full and exclusive distribution rights of all NBL brands in the Republic of South Africa for a period of 10 years commencing April 1, 2008. As brand owners, NBL will retain responsibility for the overall strategic governance of its brands.
The statement said at the end of the 10 year period, the joint venture can be dissolved, in which event each shareholder can withdraw its brands under a process of compensation. In order to hedge the risk to NBL, the amount payable or receivable by NBL on termination of the agreement has been capped at a minimum of 10% and a maximum of 21% of the value of DHN Drinks.
The DHN joint venture is conditional on the approval of the Competition Commission of South Africa. In addition, Diageo and Heineken have also reached an agreement on the terms of a second joint venture to construct and operate a new brewery and bottling plant in Gauteng province, South Africa.
Heineken will own 75% and Diageo will own 25% of this company, which will produce Amstel and certain other key brands. The new brewery is expected to produce 3 million hectolitres of beer per year, according to a source close to the deal.