Company Analysis

Update: Why Foreign Core Investors Are Raising Stakes In Nigerian Arms, By Expert

Veteran shareholder activist and co-founder of the Nigerian (now Noble) Shareholders Solidarity Association (NSSA), the premier shareholders’ group in the country, Alhaji Gbadebo Olatokunbo, on Tuesday insisted that the decision of foreign core investors of companies in the country has nothing to do with a vote of confidence in the county or its economy.

Reacting to the opening paragraph of the story by investdata.com.ng, titled Heineken B.V Raises Stake In NB, Acquires 7.241m Shares, which detailed how Heineken BV and other insiders of Nigerian Breweries Plc, including its chairman, Chief Kolawole Jamodu, have gradually raised their stakes, Olatokunbo said it may also have nothing to do with buying out minority shareholders after all.

In a telephone conversation, he noted that “what Heineken B.V is doing, is what Unilever, Nestle, and Commantoros of Flour Mills, among others are doing.”

The question to ask, he stressed, “is why?”

Continuing, the activist explained, “now these major shareholders got their dividends for 2019 financial year, and because of the foreign exchange problem in the country, owing to the fact that the Central Bank of Nigeria (CBN) stopped the sale of forex since March, the core investors have been unable to repatriate their dividends from the country.

“They can’t put it in the bank to wait for US Dollars when interest rate is near zero and inflation is 12.83%, asides the fact that as corporate, they can’t go into black market to buy currency at N480/$.

“So, the most prudent thing to do with that money is reason for their resort to this stock buy-back, moreso if they see the current valuations as attractive, given the depressed market.

“That is what is happening,” he stressed.

Checks by Investdata News confirm this trend.

For the period, therefore, Heineken B.V earned N6.06bn from the total N16.073bn distributed as total dividend for the year ended December 31, 2019, at N2.01 per share. The company had earlier distributed N6bn as interim dividend, meaning that of the N10.073bn in final dividend, the core investor received N3.803bn as its share that needed to be repatriated.

Unilever Overseas Holdings, the core investor in Unilever Nigeria purchased 17,023,490 shares of the company at N12 on August 10. It was followed by 67,094,382 shares of the conglomerate at N12.5 per share on August 14, 2020, thereby further increasing its stake in the Nigerian arm. Bringing total purchased in both days to 84,117,872 units.

Also, at the end of 2019, Unilever Overseas Holdings B.V Holland held 57.05% of the company’s shares outstanding; followed by Unilever Overseas Holdings BV with 15.27%; and Stanbic Nominees Nigeria Ltd (Cumulative holdings), 7.59%. This means Unilever Overseas Holdings holds 72.32% and is further taking advantage of the low prices.

On August 20, 2020, Nestle SA purchased 636,384 units of Nestle Nigeria at N1,174.67 each from the NSE, thereby increasing its stake in its local subsidiary from 524,559,457 units or 66.18% of the paid-up capital as at 31 March 2020.

Recall that the directors of Nestle Nigeria recommended a dividend per share of N45, representing an estimated N36.614bn of the N50.333bn distributed as dividend.

But the most consistent core investor yet in the purchase of its investee-company shares so far remains Excelsior Shipping Company Limited, which as of March 31, 2020, held 62.95% of the paid up share capital of Flour Mills of Nigeria, according to the register of members. In the one year between March 31, 2019 and the corresponding period of 2020, Excelsior Shipping increased its shares by 324,848,893 units or 14.39%. But between May 22 and July 9, the core investor, represented on the board by John George Comantaros, has raised its stake in 60 year-old Flour Mills by a further 7,047,769 shares at an average price of N21.00 each.

Olatokunbo challenged directors of these foreign companies to assure Nigerians that they do not have sinister motives for gradually, but steadily buying out Nigerian shareholders, only to voluntarily delist their companies as many others have done before them.

The list, he lamented, includes Coca-Cola franchisee- Nigerian Bottling Company Plc (which delisted in 2011); Seven-Up Bottling Company, its major competitor March 5, 2018); Avon Crown Caps and Containers Plc (September 18, 2017); and NewRest ASL Nigeria Plc (May 13, 2019).

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