There are indications that Guinness Nigeria Plc has submitted an application to raise N39.7bn by way of rights issue to existing shareholders of 684,494,631 Ordinary Shares of 50 Kobo each at N58.00 per share or 17% of market price.
The offer, whose application was submitted through Stanbic IBTC Stockbrokers Limited, according to analysts, is on the basis of five new ordinary share for every 11 Ordinary Share held (5:11).
The offer proceeds is less than the N56bn the company initially sought to raise, according to a statement last year.
The company intends to use the funds to deleverage its balance sheet given its relatively high debt level (Debt/Equity ratio of 1.3 compared to 0.1 ratio of its major rival- Nigerian Breweries), finance its working capital needs and expand operations.
Expectations are that parent company, Diageo Plc plans to take up its rights by way of a debt/equity swap wherein the outstanding foreign currency loan (N20.3 billion as at the 2017 half year ended December 31, 2016) from Diageo will be used as payment for its rights in Guinness Nigeria. This may give Diageo up to 80% equity stake from around 54%, in the event that domestic individual and corporate shareholders do not take up their rights.
According to the unaudited result for the 2016 half year, Guinness reported a rise in finance cost from N2.211 billion to N6.113 billion, resulting in a 165.74% growth in net finance cost which stood at N4.578 billion, up from N1.722 billion. This followed a N3.1 billion FX loss on the company’s foreign currency loans and higher interest expense of N3.0 billion
The management named the finance expense on loans and borrowings of N1.739 billion, as the biggest finance cost item, rising from the previous N1.317 billion; ahead of the N622.926 million interest expense on overdraft, from N443.874 million. There was also the N622.893 million interest expense on intercompany overdue debts and others, from N443.874 million.
These resulted to a loss before tax of N4.662 billion for the period, from the previous pre-tax profit of N1.652 billion; and net profit of N4.667 billion, as against the N1.172 billion net profit. This translated to loss per share of 310 kobo; from previous half year’s 78 kobo earnings.
The company says part of the strategy is to extend its commitment to the development of the Nigerian economy, with its expansion project expected to create additional 200 permanent jobs in the country and enable it meet growing demand for Guinness Foreign Extra Stout, Harp Lager Beer and its other brands sold across the country.
A statement by the company had said the investment would include the upgrade of existing facilities as well as increase the brewing capacity of both Benin and Ogba Breweries.
Qualification date for the rights offer is Wednesday March 15, 2017.