Three months after announcing a change of hearts by its parent company- Diageo in its plans to increase its 54% stake through an offer, shareholders of Guinness Nigeria Plc will vote to approve plans by the directors for injection of fresh N40 billion ($127 million) capital via rights issue. This would enable the company strengthen its balance sheet, in the aftermath of recent operational losses it suffered.
“Guinness Nigeria Plc believes the rights issue will allow the company to optimize its balance sheet improving its financial and operational flexibility,” it said in a notice to shareholders, according to Reuters.
The company plans to also seek shareholders approval for its bankers to convert debt owed by Guinness Nigeria to equity by buying into the rights issue, assuming any creditor so desires. It was not however clear whether Diageo will convert its loan this way.
In October Diageo changed plans to raise its stake in Guinness Nigeria by 15.7% at the cost of for up to N41.37 billion due to the tough conditions in one of its biggest markets for the world-famous stout brewer, preferring instead to grant the Nigerian unit a $95 million loan facility to help it cope with dollar shortages.
That offer would have raised Diageo’s stake to 70%, but the parent company had through its wholly owned subsidiary- Guinness Overseas Limited, said it preferred to focus on supporting Guinness Nigeria.
In its unaudited result for the first quarter ended September 30, 2016, Guinness Nigeria reported a loss after tax of N2.226 billion, down from the previous first quarter profit of N362.296 million, resulting in loss per share of 148 kobo, from a 24 kobo earnings, despite the slight increase in turnover from N21.741 billion in the corresponding period of 2015, to N23.018 billion.
In apparent favourable market sentiment for the rights issue, the share price of Guinness Nigeria which had fallen 19% this month, rose 2.2% to N68.70 on the Nigerian Stock Exchange (NSE) on Monday following news of the rights issue.