…Joins Cadbury Schweppes Overseas, Nestle S.A. Switzerland, Total Raffinage, etc
… Acquisition attributed to debt for equity transfer, reduction of free floats
In spite of the current market downturn, Stanbic Africa Holdings last week made a statement about the enormous potential of the Nigerian equity market with the acquisition of additional 1.141 billion ordinary shares in Stanbic IBTC Holding, a development that raised its percentage shareholding in the company to 64.4 percent.
“This is to inform The Nigerian Stock Exchange that Stanbic Africa Holdings Limited (a wholly owned subsidiary of Standard Bank Group Limited) and parent company of Stanbic IBTC Holdings Plc, has recently acquired an additional 1,141,191,943 (one billion, one hundred and forty one million, one hundred and ninety one thousand, nine hundred and forty three) ordinary shares in Stanbic IBTC Holdings PLC in an “Off-Market” transaction. With this acquisition, the total percentage shareholding of Stanbic Africa Holdings Limited in Stanbic IBTC has increased by 11.35% from 53.09% to 64.44% post this transaction” Stanbic IBTC Holdings said in a note to the Exchange.
Based on the company’s latest audited financial statement for the period ended December 31, 2017, released in March 2018, the majority shareholders with percentage shareholding above 5 percent in Stanbic IBTC Holdings were Stanbic Africa Holdings Limited with 5,333,569,874 ordinary shares representing 53.07 percent and First Century International Limited with 750,504,089 ordinary shares representing 7.57 percent.
Our analysis shows that the latest cross deal could have come from one of the 11 shareholders that controlled 7,378,393,724 ordinary shares, representing 73.42 percent of the total shares outstanding other than Stanbic Africa Holdings.
With Stanbic Africa Holdings Limited initially in control of 5,333,569,874 representing 53.07 percent, that leaves 2,044,823,850 ordinary shares from which the 1,141,191,943 ordinary shares involved in the cross deal could have come from as none of the other minority shareholders has enough units as the shares traded in the cross deal. Stanbic IBTC Holdings’ share price closed at N46.10 on the day the deal was announced, meaning that the deal would have cost about N52.61 billion.
Some analysts agreed that a major motive behind this deal was more control in its local subsidiary while others however suggested that the deal could have been motivated by a debt to equity transfer.
“This kind of deal could have been motivated by debt to equity transfer. It is most likely that a debt transaction took place between the parties in the past and this is the time the repayment was made in the form of a bloc sale of shares’, said Wale Olusi, an analyst with the United Capital.
“Investors now are considering so many factors about Nigeria and these include currency risk, country risk and policy normalisation in developed economies, and as such some of them fly for safety which is what is responsible for the market downturn. Meanwhile, this is the time for domestic investors to come in as the market downturn is a global phenomenon ”, Olusi added.
“Stanbic Africa Holdings wanted to reduce float and have more control in Stanbic IBTC Holdings as these are likely the motives for the latest acquisition, Fola Abimbola, an analyst with CSL Stockbrokers said.
The Nigerian equity market has lost the momentum it recorded in the first two months of the year. In January and February 2018, the All Share Index (ASI) posted 16 percent and 13.30 percent returns but that steam has been lost as the market returns are worse off now compared with the same period a year ago. It further closed lower at 8.53 percent in March; 7.91 percent in April while in May 2018, ASI ended in the negative territory at -0.36 percent.
Analysts are of the opinion that the latest move will boost market confidence.
“It is a sign that in spite of the downturn, the Nigerian equity market holds a lot of opportunities for investors. From my viewpoint, the acquisition was done to have more control in Stanbic IBTC Holdings”, said Saheed Bashir, group head business development at Meristem Nigeria.
“The acquisition was done for strategic reasons and it will not have a negative implication for the market so long that the 30 percent free float requirement is not breached”, said Fisayo Adetayo, an equity trader at EDC Securities Limited, a subsidiary of Ecobank Transnational Incorporated (ETI).
“It could have positive effect on the stock in question”, Adetayo added.
Based on this development, Stanbic Africa Holdings has joined the likes of Cadbury Schweppes Overseas Limited, Nestle S.A. Switzerland, Total Raffinage Marketing and BOC Holdings Limited as firms having a minimum of 60 percent shareholdings in their domestic subsidiaries.
Their local subsidiaries have highest dividend payout ratios in Nigeria and they still sustain their tradition up to the present moment. Consequently, we are of the opinion that higher dividend income motivated the cross deal between Churchgate and Stanbic Africa Holdings.
Cadbury Schweppes Overseas Limited controls 74.97 percent shareholding in Cadbury Nigeria based on the latest audited financial statement for the period ended December 31, 2017, and it earned N225.29 million dividends from the N300.51 million declared as final dividend in FY17.
Nestle S.A. Switzerland control 66.18 percent shareholding in Nestle Nigeria just as it earned N14.43 billion as dividend from the N21.79 billion final dividends paid to shareholders in FY17.
When combined, Unilever Overseas Holdings BV Holland and Unilever Overseas Holdings BV control 67.09 percent shareholdings in Unilever Nigeria. They both earned N1.93 billion as dividend income from the N2.87 billion paid as final dividends in FY17.
Total Raffinage Marketing controls 61.72 percent shareholding in Total Nigeria, and as at the end of the 2017 financial year, it earned N2.93 billion as dividend income from the N4.75 billion final dividends paid to shareholders.
BOC Holdings Limited UK controls 60 percent shareholding in BOC Gases and it received N49.95 million dividends from the N83.25 million final dividends paid to shareholders in FY17.
Other foreign investors that are major shareholders with percent shareholdings in excess of 50 percent in companies registered and listed in Nigeria include Heineken Brouwerijen BV Holding and Distilled Trading International BV Holding which both have 53.23 percent shareholding in Nigerian Breweries; Setfirst Limited and Smithkline Beecham Limited which both have 46.4 percentage shareholding in GlaxoSmithkline Consumers Nigeria, as well as John Holt & Co.(Liverpool) with 51.45 percent shareholding in John Holt Nigeria plc.
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