Global manufacturing giants have indicated interest in injecting about N300 billion into their operations to consolidate their market share in the key sectors of the economy.
The Nation’s check at the weekend showed a pipeline of about six major equity investments by foreign majority core investors in six quoted companies, with nearly half of the transactions already undergoing issuance.
LafargeHolcim, world’s leading building material company, plans to inject N102 billion in its Nigeria-based pan-African operations, Lafarge Africa Plc. Unilever Plc, United Kingdom, will inject N38 billion in Unilever Nigeria Plc. Diageo Plc, United Kingdom, plans to take up additional N21 billion in Guinness Nigeria. Heineken BV was said to be considering injecting more than N15 billion in Nigerian Breweries while world’s largest brewer, Anheuser-Busch InBev plans to invest some N125 billion in its Nigerian operations.
Most of the recapitalisations are expected to be done through supplementary share issuance to existing shareholders, otherwise known as rights issue. With this, the shares will be pre-allotted to existing shareholders on the basis of their existing shareholdings. Three of the companies-Guinness Nigeria, Lafarge Africa and Unilever Nigeria have already secured the crucial shareholders’ approval to undertake the rights issue.
LafargeHolcim, which holds the majority equity stake of 72.59 per cent in Lafarge Africa, has already formally indicated it will subscribe fully to its rights under the N140 billion rights issue approved by shareholders for the Nigerian subsidiary. The Lafarge Africa’s rights issue is the largest so far in the Nigerian capital market and LafargeHolcim’s N102 billion investment is reported to be the largest investment in a listed company by an investor.
With the approval by shareholders, the N140 billion Lafarge Africa’s rights issue is expected to be launched in late September and finalised by the fourth quarter. LafargeHolcim will pick up its rights under a debt-for-equities deal that will see conversion of LafargeHolcim’s dollar-based loan to equities.
Diageo, which holds the majority equity stake in Guinness Nigeria, is expected to inject more than N21 billion into the Nigerian company under a N39.7 billion rights issue. Already, Guinness Nigeria has secured the approval of the Nigerian Stock Exchange (NSE) to undertake the rights issue, after it had received unanimous endorsement of the shareholders at an extraordinary general meeting held earlier this year.
Under the plan, Guinness Nigeria will be offering 684.495 million ordinary shares of 50 kobo each to shareholders at a price of N58 per share. The rights’ shares will be pre-allotted on the basis of five new ordinary shares for every 11 ordinary shares held as at March 15, 2017.
Diageo had earlier indicated interest in acquiring additional shares of up to 15.7 per cent in Guinness Nigeria through its wholly owned subsidiary, Guinness Overseas Limited. It however backed down from the direct acquisition. An investment analyst in the know said the foreign core investor might have considered rights issue as a less expensive option to achieving the same objective.
Unilever UK, which holds 60.06 per cent majority equity stake in Unilever Nigeria through its Unilever Overseas Holdings BV, is expected to inject about N38 billion into the Nigerian subsidiary under a new capital raising programme already approved by the shareholders of the fast moving consumer goods company.
Shareholders of Unilever Nigeria recently approved a proposal by the board of the company to raise up to N63 billion in new equity funds by selling new shares to existing shareholders. In preparation for the rights issue, shareholders also increased the authorised share capital of the company to N5 billion or 10 billion shares through the creation of additional 3.95 billion ordinary shares of 50 kobo each.
Unilever UK has shown sustained interest in increasing its majority shareholding in the Nigerian subsidiary. It mopped up additional shares through open market purchases at the NSE to increase its majority stake by 1.53 per cent from 58.53 per cent in 2015 to 60.06 per cent in 2016. It had also made open market purchases in 2015.
Unilever UK will be required to contribute at least N37.84 billion to the rights issue to retain its current shareholding and the multinational may increase its stake by applying for additional shares from renounced rights.
Unilever UK had earlier indicated it intended to acquire up to 75 per cent controlling equity stake in the Nigerian subsidiary. Unilever UK had in first half of 2015 sought to increase its majority equity stake in the Nigerian subsidiary from 50 per cent to 75 per cent, citing long-term strategic importance of Unilever Nigeria to its global business.
In a transaction initially valued at about N43 billion or £144.5 million, Unilever Overseas Holdings sought to increase its equity stake in the Nigerian company from 50.04 per cent up to a maximum of 75 per cent by buying additional shares from minority shareholders. The tender offer sought to acquire about 942.42 million ordinary shares in Unilever Nigeria at a price of N45.50 per share in cash.
In a statement signed by Richard Hazell, Director, Unilever Overseas Holdings B.V, Unilever had said it was making the additional share acquisition as part of long-term strategic plan by the conglomerate as it believes that Nigeria offers significant growth potential.
“The Unilever Group has had a major presence in Nigeria for many years and continues to believe that the country offers significant growth potential. This makes Nigeria a strategic long term investment priority for Unilever Overseas. Globally, the Unilever Group is focused on investing in the foods, household and personal care categories and the long heritage and great brands of Unilever Nigeria in these categories in Nigeria make it attractive for Unilever Overseas to increase its holding in Unilever Nigeria, whilst maintaining its stock exchange listing,” Unilever stated in the statement enclosed in the tender offer.
Nigerian shareholders however largely shunned the N43 billion share-acquisition bid as it recorded less than a third of its target. At the conclusion of the tender offer, Unilever UK’s total shareholdings in Unilever Nigeria only increased by 8.49 per cent from 50.04 per cent to 58.53 per cent. The increase also included open market purchases.
World largest brewer, Anheuser-Busch InBev has unveiled plan to merge its Nigerian businesses and invest some $400 million, about N122 billion, in Nigeria in a major strategic move to consolidate its Nigerian base for further expansion into the Sub-Saharan Africa (SSA).
Under the arrangement, three indirect Nigerian subsidiaries of Anheuser-Busch InBev-International Breweries Plc, Intafact Beverages Limited and Pabod Breweries Limited, will be merged through a scheme of merger. International Breweries is expected to be the subsisting post-merger company. The proposed merger has been approved by the board of International Breweries.
A regulatory notice on the merger has already been filed at the NSE, kick-starting the merger process after the approval of the business combination by directors of the companies.
The merger is believed to be a major competitive move by Anheuser-Busch InBev to give its operations a major nationwide push to increase its market share. International Breweries is located in Ilesa, Osun State in the South West region. Intafact Beverages’ brewery is ssituated in Onitsha, Anambra State in the South-East region while Pabod Breweries is located in Oginigba, Port Harcourt, Rivers Sate in the South-South region.
Anheuser-Busch InBev has also publicly indicated its plans to spend $400 million in establishing a major brewery in Nigeria as it moves to take on the two main Nigerian beer market leaders- Nigerian Breweries and Guinness Nigeria.
In a bid that was pushed through by voting through poll, shareholders of Nigerian Breweries (NB) have also approved a share-for-dividend option that will see qualifying shareholders receiving new ordinary shares in the company instead of the final cash dividend, on terms and conditions as the board may determine based on prevailing market conditions. Nigerian Breweries earmarked N28.4 billion as cash dividend for the 2016 business. In poll voting, shareholders vote on the basis of shareholdings rather than the voice vote or “show of hands” voting in non-contentious issues. A poll-voting thus can only succeed with the support of the majority core shareholder.
Head, equity capital market, PanAfrican Capital, Mr. Babatunde Oyekunle, said the new investments by the foreign investors are part of proactive plans to consolidate their Nigerian businesses and position them for expected growth in the Nigerian economy.
According to him, the new capital injections reflect the beliefs of the foreign major investors in the prospects of the Nigerian economy in the long-term.
He pointed out that such major investments by multinationals are usually proposed after exhaustive mid-to-long-term research and consideration of all variables including macroeconomic outlook, political risks and market size.
“These investment proposals show they believe in Nigeria; the growth and potential of the economy. Most pundits agreed on the enormous potential of the Nigerian economy, the market is here and the headroom for growth is huge,” Oyekunle said.