UAC offers to buy Portland Paints shares at over 200% premium

UAC of Nigeria Plc, one of the largest diversified businesses in the private sector is offering shareholders of Portland Paints and Products Nigeria Plc well over 200 percent premium on their share price as it (UACN)  embarks on Mandatory Take-Over (MTO) of up to 2 million ordinary shares of 50kobo each in Port Paints.

Stanbic IBTC Stockbrokers on behalf of UACN, notified the Dealing Members at the Nigerian Stock Exchange (NSE) of the Mandatory Take-Over bid at N4.47 per share. The transaction, valued at N8.94million implies that UACN Plc is paying shareholders a premium of N3.09 or 223 percent, considering the N1.38 current market price of Portland Paints and Products Nigeria Plc.

“I think that UACN found some intrinsic value beyond the 200% offer and the whole transaction is long and strategic in coming”, Patrick Ezeagu, chairman, Association of Stockbroking Houses of Nigeria (ASHON) told BusinessDay.

Ezeagu, who is the Managing Director and Chief Executive Officer of Solid-Rock Securities, said “UACN appears to me to be bring on board its know-how and resources to boost Portland Paints and may also find some synergic benefit in the business mix with Chemical and Allied Products (CAP) which is part of the backward integration policy of UACN, now a holding company. Ultimately, the new shareholders will be better off in the long run.”

UAC of Nigeria Plc is a leading diversified company, operating in the food and beverages, real estate, paint and logistics sectors of the economy.

An offer like this occurs when an acquiring company makes a bid in an effort to assume control of a target company, often by purchasing a majority stake. If the takeover goes through, the acquiring company becomes responsible for all of the target company’s operations, holdings and debt.

As a publicly traded company, the acquiring company is making an offer for all of the target’s outstanding shares.

Patrick Ilodianya, managing director, SFS Capital Nigeria Limited said on the surface, the premium offer looks like an attempt to jump start trading on the stocks of Portland Paints and improve the share trading price.

Boniface Okezie, chairman, Progressive Shareholders Association of Nigeria (PSAN) told BusinessDay that, “It means they want to pay off the shareholders. For me, shareholders should accept because for quite some time, dividend has not been paid to the shareholders of that company”.

Though, his concern is that the deal when through will make it easier for Portland Paints and Products Nigeria Plc to delist from the Nigerian Stock Exchange.

The qualification date for the transaction is tomorrow (Wednesday) November 16, 2016 which is the date qualifying shareholders of Portland Paints will be determined.

“Note that the qualifying shareholders are the shareholders of Portland Paints other than UACN whose names appear in the register of members of Portland Paints as at the Qualification Date and who are eligible to receive the Take-Over Bid document,” according to a note to shareholders.

The mandatory tender offer (MTO) provision of the Section 131 of the Investment and Securities Act (ISA) and Rule 445 of SEC makes it mandatory for any institution or person that acquires at least 30 percent of a company to make an MTO to other minority shareholders.

UAC of Nigeria had in June 2013 acquired the majority equity stake of 51 percent in Portland Paints. Portland Paints & Products Nigeria Plc principally engages in the business of manufacturing and sale of paints, marketing of sanitary wares and marketing of Hempel marine and protective coatings for the oil and gas sector.

The Nigerian Stock Exchange data show Portland Paints has Market Capitalisation of N552million and total shares outstanding of 400million.

Portland Paints & Products Nigeria Limited was incorporated as a private limited liability company on September 3, 1985. The company by a special resolution of April 24, 2008 changed its name to Portland Paints & Products Nigeria Plc, consequent upon it becoming a public limited liability company. The Company was listed on the floor of the NSE on July 9, 2009.

Iheanyi Nwachukwu