While The Raysun Nigeria Limited, a subsidiary of the Heineken Group is moving for a 100percent stake in Champion Breweries Plc, the minority shareholders of the Nigerian listed brewer are saying no to the mandatory takeover offer announced last October.
About Champion Breweries
Champion Breweries Plc was incorporated in Nigeria as a limited liability company on July 31, 1974 and was later converted to a public limited liability Company (PLC) on September 1, 1992. The Company is involved in the brewing and marketing of Champion lager beer and Champ Malta. The company also provides contract brewing and packaging services to Nigerian Breweries Plc, a related party within the Heineken group. The Company has related party relationships with its parent company, Heineken N.V. and Heineken group entities.
Main Board listing
Listed on the Beverages – Brewers/Distillers subsector of the Consumer Goods sector of the NGX Main Board, Champion Breweries Plc has shares outstanding of 7,829,496,464 units. The N2.36kobo per share which the stock closed as at Monday January 24 represents an increase by 0.4percent year-to-date (YtD).
The minority shareholders have written to Nigeria’s SEC
In a letter to the Commissioner, Compliance, Securities and Exchange Commission (SEC), the shareholders under the aegis of Progressive Shareholders Association of Nigeria (PSAN) alleged “dissatisfaction with the treatment of longstanding minority shareholders and staff of champion Breweries Plc”.
The January 6 letter to SEC seen by BusinessDay’s INVESTOR titled “Re: Marginalisation Of Minority Shareholders Of Champion Breweries Plc” was signed by PSAN national chairman, Boniface Okezie where the minority shareholders claimed marginalisation by the majority shareholders of the company.
“There has been a recent attempt by the current core investor to sideline other minority shareholders in a manner not beneficial to their interests considering that many of them had staked their investments in the company long before the current core investor came along. It has become common knowledge that the core investor currently owns about 83percent shares in the company which were largely acquired in a clandestine manner from the secondary markets against the regulatory provisions of your honourable commission about majority foreign holdings,” the letter reads.
Raysun had increased her shareholding from 60.4percent to 84.71percent in 2021
Analysis of the company’s shareholding as shown in its annual report for year ended December 31, 2020 had shown thus: The Raysun Nigeria Limited 60.4percent (4,729,308,000 units); Assets Management Nominee A/C “Y” 12.3percent (961,864,000 units); Akwa Ibom Investment Corporation 10percent (787,157,000 units), and other shareholders 17.3percent (1,351,167,000 units). In 2021, The Raysun Nigeria Limited acquired additional shares in Champion Breweries Plc thus increasing her shareholding to 84.71percent.
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Mandatory take-over offer by Raysun announced last October
In a January 25 public notice at the NGX, Champion Breweries Plc said the take-over offer is at N2.60 per share. Acceptance for the offer which opened on January 10 closes on January 31, 2022. Stanbic IBTC Capital is the financial adviser to the take-over offer.
Champion Breweries Plc had in an October 11, 2021 notice at the Nigerian Exchange Limited (NGX) informed the investing public of the proposed mandatory take-over by The Raysun Nigeria Limited (Raysun) to acquire up to 1,196,799,164 ordinary shares (the Offer Shares) from the other shareholders of Champion Breweries Plc. The Raysun Nigeria Limited is a subsidiary of the Heineken Group.
“The mandatory take-over is being effected in accordance with the directives of the regulator subject to the provisions of Section 131, Part XII of the Investment and Securities Act, No. 29, 2007 (as amended) and Rule 445 of the Securities and Exchange Commission (SEC) Rules and Regulations, 2013 (as amended). Accordingly, on 10 May 2021, the Board of Raysun granted approval for a take-over offer to be made to all the other shareholders of the Company other than Raysun, for the acquisition of the Offer Shares representing 15.3percent of the total issued and fully paid-up share capital of the Company.
Raysun was said to have gotten SEC’s nod to proceed with mandatory take-over offer
“Raysun has received the SEC’s authority to proceed with the Offer and will file the offer document with the SEC for registration. Following the registration, Raysun will be making a tender for the Offer Shares, which the shareholders may accept at their discretion. Further to the above and in accordance with Rule 17.5 (Part C, Issuers’ Rules) of The Rulebook of The Exchange (the Rulebook), we hereby notify The Exchange of the Offer in fulfilment of our obligation to report such matters and will continue to do so in line with the requirements of The Rulebook,” Champion Breweries Plc said in the October 11, 2021 notice at the NGX signed by its chairman, Elijah Akpan.
Minority shareholders say no unit of shares owned by them will be offered for sale to achieve a mandatory takeover
The minority shareholders further said in their letter to SEC that: “It is however our resolution as minority shareholders including the Akwa-lbom state government which owns an 11percent stake that no unit of shares owned by the minorities will be offered for sale to achieve a mandatory takeover. We rather propose that a merger between the company and any other suitable match would be a more reasonable approach than delisting the company shares as has been done in the past by the same core investor.
“We request that shareholders be allowed to endorse a potential deal formally at an AGM where all stakeholder interests are represented. We have no issues with the core investor if they choose to divest their investment which they are at liberty to, but we insist that the core investor desists from practices that endanger the fortunes of other minority investors out of the company.”
Shareholders said contributed to restructuring Champion Breweries balance sheet for current profitability
According to the minority shareholders, “A few years ago, a move spearheaded by minority shareholders saw the restructuring of the balance sheet of the company which has resulted in profitability recorded by the company at this time after so many years of faltering without paying any dividends to longstanding shareholders. We also hold the position that but for the risk taken initially by the local minority investors, the core investors may have had nothing of value to hold on to in the company.”
The minority shareholders further said, “Recent developments have revealed that the core investors have sought a mandatory takeover of the company which may result in its eventual delisting of its shares, a position we feel is detrimental to the interest of the minority investors.
“It is also our understanding that the SEC has approved the mandatory takeover without a tender paper indicating the approved buyback price and other relevant details of the transaction. In the same vein, the NGX’s free float regulations require a minimum local ownership which appears to not be obtainable in the current ownership structure”.
The minority shareholders also sought to know the offence they have committed to not be invited to an extraordinary meeting “where issues on the proposed mandatory takeover may have been adequately explained and due process followed, carrying everyone along, to ensure that the interest of the common investor is protected.
“We would like the SEC to explain why it has given approval for a mandatory takeover where minority shareholder interests are potentially at stake. We would also like to know the intentions of the core investor in proposing a mandatory takeover including the reasons behind the decision and the expected outcome of this decision”.
Still deficient in free float
Companies listed on the NGX are required to maintain a minimum free float for the set standards under which they are listed in order to ensure that there is an orderly and liquid market for their securities. Free float, also known as public float, refers to the shares of a company that can be publicly traded and are not restricted or held by insiders.
Company listed on the Main Board is required to have a minimum of 20percent of the issued and fully paid up shares or the value of its free float is equal to or above N20 billion. Champion Breweries Plc (listed on the Main Board) is among companies with free float deficiencies. The percentage of its free float is just 5.23percent while its free float value is N995.288million.
The company does not have a compliance due date for its deficient free float and the NGX Regulation Limited (NGX RegCo) said in its X-Compliance Report that it is engaging Champion Breweries and others alike on this. The X-Compliance Report is a transparency initiative of NGX RegCo which is designed to maintain market integrity and protect investors by providing compliance-related information on all listed companies.
Granted two (2) years grace period to comply with free float requirements
In August 2019, the Nigerian Exchange Limited (NGX) granted Champion Breweries Plc an additional two (2) years grace period to comply with the 20percent free float requirements of the Exchange. This extension was subject to the Company holding a “facts behind the figures” session to brief the market of its plans to cure its free float deficiency and submitting quarterly compliance reports to the Exchange.
Nine months scorecard shows an uptick across top-to-bottom line figures
In the nine-month period ended September 30, 2021, Champion Breweries Plc grew its revenue to N7.082billion from preceding 9M’2020 low of N4.893billion. Profit before tax (PBT) increased to N907.627million from N84.983million in 9M’2020. Profit after tax (PAT) also rose to N635.339million from N59.408million in 9M’2020. Its basic and diluted earnings per share (EPS) increased to 8.11kobo in 9M’2021 from 0.72kobo in 9M’2020.
