Alhaji Aliko Dangote’s Dangote Industries Limited (DIL) may soon launch a mandatory takeover bid for minority shares in Tiger Branded Consumer Goods Company (TBCG) Plc.
DIL last week concluded the acquisition of the majority equity stake in TBCG, formerly known as Dangote Flour Mills. DIL acquired 65.6 per cent majority equity stake in the former Dangote Flour Mills Plc, now rebranded TBCG from Tiger Brands Limited, the South African core investors.
A cross deal for the transfer of more than 3.28 billion ordinary shares of 50 kobo each of TBCG from Tiger Brands Limited to DIL was struck last Monday at the NSE. The cross deal was struck through the negotiated cross deal window of the NSE at N1.24 per share. TBCG’s issued share capital currently stands at 5.0 billion shares, indicating that the transferred 3.28 billion shares represents 65.6 per cent of the current issued share capital.
The latest acquisition increased DIL’s shareholding in DIL to more than 75 per cent. With this, DIL might be required to make a mandatory take-over bid to the remaining shareholders of TBCG in line with section 131 of the Investment and Securities Act (ISA) and Rule 445 of SEC’s Rules and Regulations.
In the same circumstance, FBN Assurance, which had acquired 71.2 per cent equity stake in Oasis Insurance, had made a mandatory takeover bid for shares held by minority shareholders.
According to SEC’s Rule 445, any investor that acquire more than 30 per cent of the shares of a quoted company through non-primary transactions would have to make a take-over bid to other shareholders.
The rule states that “no person shall acquire, through a series of transactions or otherwise, more than 30 per cent of the shares of a public quoted company without making a bid.”
Also, where an existing shareholder, together with other persons acting in concert, hold not less than 30 per cent but more than 50 per cent shares of a company acquires additional shares, such person or persons shall make a takeover bid to the other shareholders of the company.
The rule however indicated exemptions to primary market transactions including private placement, rights issue and initial public offerings. Takeover bid will not apply where an ailing company undertakes a private placement which results in the strategic investor acquiring more than 30 per cent of the voting rights of the company.
Also, exemption was granted in the case of an acquisition or holding of or entitlement to exercise or control the exercise of more than 30 per cent voting shares of a company by an allotment made in accordance with a proposal particulars of which were set out in a prospectus where the prospectus was the first prospectus for the initial public offer of voting shares issued by the company or the person who acquired the voting shares was a promoter in respect of the prospectus and the effect of the acquisition on the person’s voting power in the company has been disclosed in the prospectus and the prospectus has been registered with the Commission.
Takeover bid will also not be required in an acquisition of shares or rights over shares which would not increase the percentage of the voting rights held by that person, such as an investor that takes up his entitlement under a fully underwritten rights issue. The rules also excluded convertible securities from the mandatory takeover bid provision.
Dangote Group’s DIL had in 2012 sold 63.35 of its equity stake in DFM to Tiger Brands in a $181.9 million deal. The deal saw transfer of 3.17 billion ordinary shares out of Dangote Group’s 3.67 billion ordinary shares of 50 kobo each in DFM to the Tigers Brand. The deal then was approximately valued at more than N28 billion, according to prevailing exchange rate.
After nearly four years of successive losses and impairing of assets, Tiger Brands reached agreement with DIL on December 11, 2015 to resell the troubled flour-milling company to DIL.
The Nation had exclusively reported approval of the acquisition by Nigerian and South Africa authorities. Sources had confirmed to The Nation that the Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator; Nigerian Stock Exchange (NSE), where TBCG is listed and all necessary South African regulatory agencies had approved the acquisition deal.
The Nation had reported that the transfer of the shares of TBCG from Tiger Brands to DIL would soon be done through the negotiated cross over window of the Nigerian Stock Exchange (NSE). The transfer of shares would subsequently be followed by the return of the company to its former name, which many stakeholders consider to be a stronger brand than the current name. The Dangote Group is the most capitalised quoted business group in Nigeria with four major companies including Dangote Cement, cement; Nascon Allied Industry, salt; Dangote Sugar Refinery, sugar; and TBCG, flour. It has several unquoted subsidiaries that are involved oil and gas, telecommunications, fruit drinks and transportation among others.
The Nation had in late December 2015 also exclusively reported the details of the acquisition deal. Under the deal, Tiger Brands Limited, South Africa’s largest food company, would divest its shareholding to Dangote Industries Limited (DIL), the holding company of Africa’s richest man, Alhaji Aliko Dangote.
A report obtained by The Nation, which outlined the key details of the Share Sale Purchase Agreement (SSPA), indicated that Tiger Brands will transfer and sell its 65.66 per cent majority equity stake in TBCG to DIL for a nominal consideration of $1. The South African majority core investor will also absorb N15.76 billion in debts.
It was the first report to outline the key financial considerations of the acquisition. TBCG has 5.0 billion ordinary shares of 50 kobo each with market capitalisation of about N5.9 billion.
In consideration for the transfer of the 65.66 per cent equity stake to DIL, DIL will inject N10 billion in form of a convertible shareholder’s loan into TBCG in January 2016. The convertible loan implies that DIL, at its option, will automatically have higher majority equity stake whenever it decides to exercise its convertible option.
“Tiger Brands Limited will transfer/sell its shares (3,283,277,052) to Dangote Industries Limited for a nominal amount ($1) in consideration for Dangote Industries Limited injecting N10 billion in January in the form of a convertible (at lender’s option) shareholders’ loan,” according to the report.
Besides, “Tiger Brands Limited’s loan to TBCG of N10.25 billion will be extinguished by way of debt forgiveness to the company” and “Tiger Brands Limited will assume the Stanbic IBTC debt of N5.51 billion and pay up the outstanding amount due to the bank”.
DIL has already given a guarantee of its continued financial support to TBCG for at least 12 months to stave off threats of liquidation facing the company.
External auditors to TBCG- Akintola Williams Deloitte, had expressed worries that accumulated losses and continuing decline in operational performance that had wiped out shareholders’ funds could threaten the survival of the ailing flour-milling company.
In the latest audit of the group, the external auditors noted that the group had accumulated losses of N23.1 billion and a negative equity of N3.1 billion by the year ended September 30, 2015. “These conditions indicate the existence of a material uncertainty which may cast doubt on the Group’s ability to continue as a going concern,” the audit report stated.
Key extracts of the audited report and accounts of TBCG for the year ended September 30, 2015 showed that the group recorded a net loss after tax of N12.68 billion in 2015, a double on a net loss of N6.28 billion recorded in comparable period of 2014. Turnover had increased from N41.27 billion in 2014 to N48.03 billion. Gross profit also rose from N3.21 billion to N4.47 billion. But a combination of interest expenses, related party expenses and administrative costs continued to undermine the company’s performance.
