There is an increasing trend in the Nigerian stock market where multinational firms are consolidating their shareholding in their local Nigerian units by choosing to convert their debts to equity.
Firms with majority foreign shareholding including Lafarge Africa, Unilever, Guinness Nigeria, Seven Up, GSK Nigeria, IHS Nigeria and Coca Cola have attempted to increase their ownership stake in the recent past or delisted from the stock exchange upon being successful.
The trend is being made possible through an increasing spate of Rights Issues.
As these companies raise their stake in these companies, the anxiety this trend brings is that it makes any long-run decisions around delisting from the Nigerian Stock Exchange (NSE) easier without them being resisted by minority shareholders.
The main reason Nigerian Bottling Company (NBC) delisted from the Nigerian Stock Exchange was that the company wants to “become a wholly-owned subsidiary of its majority shareholder, Coca-Cola Hellenic Bottling Company S.A.,” NBC said then.
IHS Nigeria Plc, a telecom infrastructure service provider company, delisted from the NSE in 2015, following the agreement reached with the investors that each shareholder would receive N4.35 per share while embarking on a corporate restructuring.
Seven-Up Bottling Company plc (SBC) announced plans last week by major shareholder Affelka S.A to acquire all the understanding and issued shares estimated at N19.33 billion naira ($60.41 million).
Privately-held Affelka, an investment firm of the Lebanese El-Khalil family currently owns 73.2 per cent of the company and is now offering N112.70 per share for the 171,542,574 ordinary shares of 50 kobos each representing 26.78 per cent of the company’s issued share capital it doesn’t currently own.
Recently, Guinness Nigeria Plc secured additional N39.7 billion new equity funds from its existing shareholders as they picked up the entire rights offered by the brewer. Guinness Nigeria had offered 684.49 million ordinary shares of 50 kobos each at N58 per share to existing shareholders based on five new shares for every 11 shares held as at the close of business on March 15, 2017. Diageo Plc, the majority core investor in Guinness Nigeria Plc, was expected to have injected an additional N21 billion in Guinness Nigeria by subscribing for its rights.
The rights issue provided another window for Diageo to inject capital into the Nigerian subsidiary after the multinational backed down from its earlier proposal to acquire additional equity shares in Guinness Nigeria.
Diageo had withdrawn from its plan to acquire additional shares of up to 15.7 per cent in Guinness Nigeria from minority shareholders, citing the challenging market conditions in Nigeria.
Also, Unilever Group move can be likened to that of Diageo. Unilever Nigeria Plc increased the Authorized Share Capital of the company to N5 billion (from N3.03 billion) by the creation of additional 3.95 billion new ordinary shares of 50 kobos and (2) to raise to N63 billion by way of Rights Issue.
As at the end of 2016 financial year, Unilever Nigeria Plc had N20.92 billion outstanding in debt, mainly comprising; N15.15 billion intercompany loan; N5 billion commercial bank loan; and N702.7 million facility from the Bank of Industry (BoI).
Unilever Overseas Holdings B.V., the parent company of UNILEVER, had offered in 2015 to increase its stake in the Nigerian subsidiary to 75percent via the acquisition of 942,215,930 ordinary shares at N45.
From 50.04percent in 2014, the parent company’s stake in the local subsidiary had risen to 60.05percent as at end of 2016, acquired via Tender Offer to other shareholders (in 2015) and open market purchases (in 2015 and 2016).
The recent Rights, at a relatively discounted price compared to the Tender Offer, offered Unilever Overseas Holdings B.V the opportunity to further increase its stake in the Nigerian subsidiary to between 63-64percent, according to estimates by Cordros Capital analysts.
Lafarge Africa Plc is currently in the market for Rights Issue of N131.7billion, which is the biggest Rights offer in the history of the Nigerian Stock Exchange.
LafargeHolcim, the company’s largest shareholder will subscribe to its rights by converting the existing debt of about N92.96billion into equity. The acceptance list for the Rights Issue of Lafarge Africa Plc of 3,097,653,023 ordinary shares of 50 Kobo each at N42.50 per share opened on November 24, 2017.
The Rights Issue to the company’s existing shareholders closes on Friday, December 15, 2017, is based on five (5) new ordinary shares for every nine (9) ordinary shares held by shareholders of the company as at November 1, 2017.
LafargeHolcim Group is the majority shareholder in Lafarge Africa Plc accounting for 73percent of the issued shares while 27percent of the company’s shares are in the hands of minority shareholders.