Lafarge Africa Plc may opt for voluntary delisting of its subsidiary, Ashaka Cement (Ashakacem) Plc, as the cement group seeks to optimise synergies and efficiency from the ongoing consolidation of its businesses. Lafarge Africa and Ashaka Cement are listed on the Nigerian Stock Exchange (NSE).
Lafarge Africa is the ninth most capitalised stock while Ashakacem ranks 35th on the capitalisation table.
Sources told The Nation that Ashakacem may be delisted soon citing technical and cost challenges that make continuing listing of the cement company unviable.
Lafarge Africa last weekend announced that it had acquired additional 23.85 per cent equity stake from minority shareholders of Ashakacem to push its majority equity stake from 58.6 per cent to 82.46 per cent.
This technically places Ashakacem below the minimum 20 per cent free float required for continuing listing on the main board of the NSE.
Listing requirements at the NSE stipulates that companies on the main board must maintain 20 per cent free float while companies on the Alternative Securities Market (ASeM) are required to maintain free float of 15 per cent.
A management source at Lafarge Africa said the management of the cement group was aware of the free float deficiency and currently considering all options on the propriety of continuing listing of Ashakacem or otherwise.
“Lafarge is aware of the Stock Exchange Listing rule regarding minimum float of 20 per cent. We are currently in the process of giving a consideration to the continual listing of Ashakacem on the Stock Exchange, but no decision has yet been made. The market will be duly informed as soon as this is finalised,” the source stated.
Free float, otherwise known as public float, refers to the number of shares of a quoted company held by ordinary shareholders other than those directly or indirectly held by its parent, subsidiary or associate companies or any subsidiaries or associates of its parent company; its directors who are holding office as directors of the entity and their close family members and any single individual or institutional shareholder holding a statutorily significant stake, which is 5.0 per cent and above in Nigeria.
Thus, free float’s shares do not include shares held directly or indirectly by any officer, director, controlling shareholder or other concentrated, affiliated or family holdings.
The NSE, like other Exchanges, uses free float to ensure that there is an orderly and liquid market in the securities of quoted companies as well as prevent undue concentration of securities in the hands of the core investors and related interests, a situation that can make the stock to be susceptible to price manipulation.
With the 82.46 per cent majority stake of Lafarge Africa reducing Ashakacem’s free float to 17.54 per cent and other concentrated shareholdings, there are indications that Ashakacem’s free float deficiency may be higher.
A source said the free float deficiency has put Ashakacem in a voluntary delisting mode and it is a matter of procedure before the delisting will be finalised.
While the rules of the Exchange granted the management of the market discretion to grant waivers for companies with free float deficiency, such waivers are temporary and are based on viable compliance plans that show the core investors are willing to redress the deficiency by selling down their major stakes or dilute such to free the minimum 20 per cent for unrelated retail minority shareholders. The rules do not allow perpetual waiver.
Market sources cited many examples that had sought voluntary delisting due to free float deficiency including Ecobank Nigeria Plc and Oasis Insurance Plc. In a similar circumstance to Lafarge Africa-Ashakacem situation, Ecobank Transnational Incorporated (ETI) Plc had opted for voluntary delisting of its listed subsidiary-Ecobank Nigeria, following a business combination that reduced Ecobank Nigeria’s free float.
Following the acquisition of Oceanic Bank International Plc by ETI, the parent company of Ecobank Nigeria, Ecobank Nigeria and Oceanic Bank had agreed to merge their businesses and subsume under the Ecobank Nigeria brand. However, as a consequence of the merger, ETI’s shareholding in the enlarged Ecobank Nigeria increased from 85 per cent to approximately 93 per cent, further reducing Ecobank Nigeria’s minimum free float to maintain listing on the NSE. ETI maintains its listing and voluntarily delisted Ecobank Nigeria.
Sources also said Lafarge Africa may be attracted by the opportunity to further reduce its costs. Lafarge had on July 9, last year received shareholders’ approval to consolidate its cement businesses in Nigeria and combine these with South African operations to create Lafarge Africa Plc. The consolidation was done by transferring Lafarge’s assets in South Africa and Nigeria to Lafarge Cement Wapco Nigeria Plc.
Under the transaction, Lafarge Group transferred its direct and indirect shareholdings in Lafarge South Africa Holding Limited of 72.4 per cent and its equity stakes in three other cement companies in Nigeria-United Cement Company of Nigeria (Unicem) Limited, 35 per cent, Ashaka Cement Plc, 58.61 per cent and Atlas Cement Company Limited, 100 per cent to Lafarge Wapco for a cash consideration of $200 million and the issuance of some 1.4 billion Lafarge Africa shares to the Lafarge Group.
Nigerian Cement Holdings B.V.(NCH), an affiliate of Large Africa Plc, two weeks ago completed the acquisition of the first 15 per cent tranche equity stake in Unicem NCH, which is owned 50 per cent by Lafarge Africa, had 70 per cent equity stake in Unicem and with the acquisition, it has now increased its stake to 85 per cent.
NCH had in November 2014 entered into an agreement with FMN Cement Industries Limited, a wholly owned subsidiary of Flour Mills of Nigeria Plc to acquire its 30 per cent investment in Unicem. The completion of the acquisition of the first tranche of 15 per cent paves the way for the acquisition of the second tranche of 15 per cent, which is scheduled for on or before February 2016.
Lafarge Africa then in late December, last year launched a Mandatory Tender Offer (MTO) to acquire the remaining 41.39 per cent equity stake held by other shareholders in Ashakacem in furtherance of the consolidation of Lafarge’s businesses. The MTO was triggered by the transfer of 58.61 per cent majority equity stake in Ashaka Cement previously held by Lafarge Nigeria (UK) Limited. Section 131 of the Investment and Securities Act (ISA) and Rule 445 of SEC make it mandatory for any institution or person that acquires at least 30 per cent of a company to make an MTO to other minority shareholders.
Under the MTO, Lafarge Africa offered 57 ordinary shares of 50 kobo each in exchange for 202 ordinary shares of 50 kobo each of Ashakacem. In addition, Lafarge Africa offered to pay N2 for every acquired Ashakacem’s share.
At the end of the MTO, 3,641 shareholders of Ashakacem tendered 534.14 million ordinary shares of 50 kobo each, which represented 23.85 per cent of the total minority stake of 41.39 per cent sought to be acquired by Lafarge Africa.
The board of Lafarge Africa last week confirmed that it has allotted about 150.73 million ordinary shares of 50 kobo each of Lafarge Africa and paid about N1.07 billion as shares and cash considerations to the shareholders of Ashakacem that accepted the MTO.
Chairman, Lafarge Africa Plc, Chief Olusegun Osunkeye, described the completion of the MTO as a major step in the consolidation of the Lafarge’s businesses.
“This is a significant step in the conclusion of the consolidation process of Lafarge Africa Plc. I would like to express my appreciation to the AshakaCem shareholders whose participation in the transaction through the tender of their shares has made this a very successful process,’’ Osunkeye said Regulatory filing indicated that by the close of the takeover bid on 31 July 2014, FBN Insurance Limited received a total of 1,289,493,953 ordinary shares bringing its shareholding in Oasis Insurance to approximately 91.1 per cent. FBN Insurance Limited elected to exercise its rights under Section 146(2) of the Investments and Securities Act to compulsorily acquire shares belonging to the minority shareholders having crossed the 90 per cent threshold. At the end of the 20-day statutory notice period FBN Insurance Limited increased its holdings by an additional 22,603,617 shares bringing its holdings in Oasis Insurance Plc to approximately 91.4 per cent.
FBN Insurance Limited thereafter transferred the sum of N310,649,730 to FBN Registrars as consideration for the outstanding 560,808,895 shares or 8.6% per cent. FBN Registrars will keep the fund in trust for shareholders who are yet to tender their share certificates. By this action, FBN Insurance Limited now holds 100 per cent equity interest in Oasis Insurance Plc.
The NSE yesterday confirmed the transaction, noting that Oasis Insurance requested for voluntary delisting after the full acquisition.
