The High Court has temporarily stopped the proposed sale and transfer of Diageo Plc’s controlling interest in East African Breweries PLC (EABL) to Asahi Group Holdings Limited after a constitutional petition was filed challenging the transaction.

Justice Josephine Mongare issued conservatory orders preserving the status quo pending an inter partes hearing of the application filed by Kenyan citizen Christine Irungu.

In her ruling, the judge restrained Diageo, EABL, Asahi Group Holdings Limited and relevant parties from completing, implementing, registering, approving, transferring, disposing of, or otherwise giving effect to the proposed transaction.

“Pending the inter partes hearing and determination of this Application, a conservatory order is hereby issued restraining the 1st, 2nd, 3rd and 4th Respondents… from completing, implementing, registering, approving, transferring, disposing of or otherwise giving effect to the sale and/or transfer of Diageo’s controlling interest in East African Breweries PLC to Asahi Group Holdings Limited,” the court order states.

The court further ordered that the ownership, control and shareholding structure of EABL remain unchanged pending further directions.

The petition was filed by Christine Irungu, who describes herself as a public-spirited Kenyan citizen acting under Articles 22 and 258 of the Constitution to protect the public interest. She named Diageo Ltd, East African Breweries PLC, Asahi Group Holdings Limited, the Capital Markets Authority (CMA) and the Competition Authority of Kenya (CAK) as respondents. The Law Society of Kenya (LSK) was listed as an interested party.

Irungu argues that the intended transaction raises significant constitutional, regulatory and public interest concerns given EABL’s position as one of Kenya’s largest listed companies.

According to court documents, the petitioner contends that Diageo previously increased its shareholding in EABL from approximately 50.03 percent to about 65 percent through a tender offer, a move that was presented to shareholders and the market as a long-term investment aimed at strengthening its partnership with the brewer.

She now claims that subsequent developments indicate that Diageo intends to dispose of its controlling stake to Asahi Group Holdings Limited, raising questions about whether the earlier acquisition of additional shares was intended to enhance the value of a future private sale.

The petition alleges that a majority shareholder in a listed public company should not use its dominant position, access to information or regulatory advantages to secure a private premium at the expense of minority shareholders and the investing public.

Irungu further argues that material information relating to the proposed transaction may not have been adequately disclosed to shareholders, investors, regulators and the public.

The petition also accuses the Capital Markets Authority and the Competition Authority of Kenya of failing to fully discharge their statutory and constitutional mandates in a manner consistent with transparency, accountability, investor protection and fair administrative action.

Among the orders sought, the petitioner wants the court to bar the regulators from approving or facilitating the transaction until a full regulatory review is conducted. She is also seeking orders compelling Diageo, EABL and Asahi to disclose all agreements, sale documents, board approvals, valuation reports, regulatory filings and correspondence relating to the proposed deal.

Additionally, the petitioner wants the CMA and CAK to file reports detailing the regulatory and competition reviews undertaken in relation to the transaction and the safeguards put in place to protect minority shareholders and the public interest.

Irungu argues that unless the court intervenes urgently, the transaction could be completed before the constitutional questions raised in the petition are determined, rendering the case nugatory.

The matter is expected to proceed to an inter partes hearing where all parties will have an opportunity to respond to the allegations and argue whether the conservatory orders should remain in force pending the hearing and determination of the substantive petition.