CAK free to review Diageo-Asahi deal as legal battles continue

In a ruling delivered on Monday, the High Court clarified that the competition regulator is free to continue evaluating the transaction and make a determination under the Competition Act.

The court also said an appeal challenging the deal before the Capital Markets Tribunal should proceed. However, the transfer of Diageo’s controlling stake to Asahi cannot be completed until the ongoing court case is determined.

The court held that maintaining the status quo would preserve the transaction without prejudicing the rights of any party while allowing statutory regulators and dispute-resolution bodies to carry out their mandates.

“I do note that the petitioner sought a raft of injunctive and disclosure orders including an order of status quo to preserve the transaction. An order of status quo will allow the appeal to be concluded as well as the Competition Authority to determine the matters before it so that the petitioner or any party may avail themselves of the dispute resolution mechanisms in the Act,” the judge said.

The court found that preserving the status of the transaction as it stood on June 18, 2026, was necessary pending the determination of the appeal before the CMA Tribunal and CAK’s review of the acquisition.

The dispute stems from a petition filed by shareholder Christine Irungu, who challenged the constitutionality of the sale of Diageo’s controlling interest in EABL to Asahi Group Holdings.

Ms Irungu argues that the transaction violates several constitutional provisions, including those relating to transparency, access to information, consumer rights, fair administrative action and protection of property rights.

She claims that Diageo, EABL and the regulators failed to disclose key details about the transaction, including information relating to the tender offer, share premium, the impact on minority shareholders and regulatory safeguards.

The petitioner also accuses the Capital Markets Authority (CMA) and CAK of failing to adequately protect investors and the public interest.

According to court filings, she contends that the CMA failed to shield minority shareholders from the possibility of a controlling shareholder benefiting disproportionately from a control premium. She further argues that CAK did not sufficiently consider the competition implications of the transaction, including its impact on consumers, distributors and the wider beverage market.

On June 18, the court issued conservatory orders halting completion of the transaction.

Diageo Kenya and Diageo Plc subsequently moved to court seeking to set aside the orders and allow the transaction to proceed.

The companies argued that issues raised by the petitioner fall within specialised statutory frameworks governing takeovers, mergers and competition regulation and should therefore be handled by the relevant regulators and tribunals.

They pointed to an appeal pending before the CMA Tribunal challenging a CMA decision that exempted Asahi from making a mandatory takeover offer to EABL’s minority shareholders.

The firms also noted that CAK was still reviewing the acquisition and that any decision by the regulator could be challenged before the Competition Tribunal.

Diageo argued that the courts should not assume supervisory powers over matters assigned by law to specialised regulatory bodies.

The brewer also rejected claims that its previous acquisition of additional EABL shares through a 2022-2023 tender offer was part of a pre-arranged plan to later sell an enlarged controlling stake to Asahi.

It argued that the petitioner had delayed in bringing the challenge and had not demonstrated any personal or public prejudice arising from the transaction.

Asahi Group adopted a similar position, arguing that the dispute should be pursued before the CMA Tribunal and the Competition Tribunal rather than through constitutional litigation.

CAK also raised a preliminary objection, saying the High Court lacked jurisdiction because the Competition Act provides an elaborate mechanism for reviewing merger decisions. The regulator relied on provisions of the Fair Administrative Action Act requiring parties to exhaust available statutory remedies before approaching the courts.

The court’s decision means regulators can continue reviewing the acquisition while preserving the existing ownership structure until the legal and regulatory processes are concluded.