The Nation Newspaper

Tag: TIGER BRANDS

  • Nigerian, South African regulators approve Dangote, Tiger Brands’ acquisition deal

    •Former Dangote Flour Mills to revert to former name, Dangote

    All appeared set for the return of former Dangote Flour Mills (DFM) Plc, now rebranded Tiger Branded Consumer Goods (TBCG) Plc, to its former name and its founding majority shareholder, Alhaji Aliko Dangote’s Dangote Industries Limited (DIL).

    Reliable sources in the know of the transaction said regulatory authorities in Nigeria and South Africa have approved the deal between TBCG’s majority core investor, South Africa’s Tiger Brand and the second major shareholder, DIL to sell Tiger Brands’ majority equity stake to DIL.

    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 sources said 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 have approved the deal.

    The sources indicated 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 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. Operating loss rose from N6.43 billion to N8.58 billion. Loss before tax thus jumped to N12.47 billion in 2015 as against N9.29 billion in 2014.

    The group’s total assets declined from N54.8 billion in 2014 to N49.35 billion in 2015. Conversely, total liabilities rose from N45.19 billion in 2014 to N52.43 billion in 2015.

    A subsequent interim report on the company for the period ended December 31, 2015 showed some marked improvement, although it remained under loss and deficit was still about N4 billion. Turnover inched up to N10.672 billion by December 2015 as against N10.665 billion recorded in comparable period of 2014. Gross profit rose by 8.5 per cent from N1.17 billion to N1.27 billion. With foreign exchange gain of 962.4 million in 2015 as against forex loss of N1.29 billion in comparable period of 2014, operating loss reduced from N2.225 billion in December 2014 to N39.09 million in December 2015. Interest costs however rose from N761.53 million to N936.48 million. Loss before tax still reduced from N2.99 billion to N975.265 million while loss after tax reduced from N2.92 billion to N900.76 million. However, net assets was negative at N3.97 billion by December 2015 as against positive standing of N6.69 billion by comparable period of 2014.

    It should be recalled that Tiger Brands, which recently renamed the former DFM as TBCG, had in November 2015 announced that it would no longer extend funding to the struggling Nigerian subsidiary, in a major boardroom crisis that saw the exit of Alhaji Aliko Dangote and other Nigerian directors loyal to him from the board of TBCG.

    The repurchase agreement between Tiger Brands and DIL had generated controversy with some operators and shareholders expressing concerns on the propriety of the deal.

    DIL has defended the decision to “buy” back its former subsidiary on the need to prevent the company from going under and save over 3,000 jobs of Nigerians.

    While some stakeholders have questioned the rationale behind the investment decision by DIL, sources close to the Dangote Group said the company had to consider the repurchase of TBCG so as to keep the company as a going concern, which preserves value for the minority retail shareholders. The move also secured direct employment for over 3,000 employees.

    “Going by every indication, the future of the company was very doubtful and that was risky for the employees which are over 3,000 Nigerians apart from others who benefit from the company’s services through other ancillary services. The return of DIL is therefore a big relief and good decision to save the jobs of the staff of TBCG,” a Dangote Group source said.

    It should also be noted that Dangote Group’s companies are the main trading partners to TBCG, according to latest audit. DIL provides strategic management services while other Dangote Group’s companies provide wide-ranging services from haulage to packaging to raw materials and shipping among others.

  • Tiger Brands to resell former Dangote Flour Mills to Dangote at one dollar

    Details have emerged of the repurchase agreement between Tiger Brands Limited, South Africa’s largest food company, and Dangote Industries Limited (DIL), the holding company of Africa’s richest man, Alhaji Aliko Dangote, on the sale of the former Dangote Flour Mills (DFM) Plc to DIL by Tiger Brands.

    Dangote Group’s DIL had in 2012 sold 63.35 per cent 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, to resell the troubled flour-milling company, now rebranded Tiger Branded Consumer Goods (TBCG) Plc to DIL.

    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.

    The report, already filed with regulatory authorities at the Nigerian capital market, will also be distributed to shareholders. It is the first report to outline the key financial considerations of the acquisition.

    TBCG has five billion ordinary shares of 50 kobo each with market capitalisation of N5.9 billion at N1.18 per share.

    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. Operating loss rose from N6.43 billion to N8.58 billion. Loss before tax thus jumped to N12.47 billion in 2015 as against N9.29 billion in 2014.

    The group’s total assets declined from N54.8 billion in 2014 to N49.35 billion in 2015. Conversely, total liabilities rose from N45.19 billion last year to N52.43 billion in the year.

    It should be recalled that Tiger Brands, which recently renamed the former DFM as TBCG, last month announced that it would no longer extend funding to the struggling Nigerian subsidiary, in a major boardroom crisis that saw the exit of  Dangote and other Nigerian directors loyal to him from the board of TBCG.

    The repurchase agreement between Tiger Brands and DIL had generated controversy with some operators and shareholders expressing concerns on the propriety of the deal.

    DIL has defended the decision to “buy” back its former subsidiary on the need to prevent the company from going under and save over 3,000 jobs of Nigerians.

    While some stakeholders have questioned the rationale behind the investment decision by DIL, sources close to the Dangote Group said the company had to consider the repurchase of TBCG so as to keep the company as a going concern, which preserves value for the minority retail shareholders. The move also secured direct employment for over 3,000 employees.

    “Going by every indication, the future of the company was very doubtful and that was risky for the employees which are over 3,000 Nigerians apart from others who benefit from the company’s services through other ancillary services. The return of DIL is therefore a big relief and good decision to save the jobs of the staff of TBCG,” a Dangote Group source said.

  • Dangote quits board of flour-producing subsidiary

    Dangote quits board of flour-producing subsidiary

    Africa’s richest man, Aliko Dangote and three other directors resigned from the board of Dangote Flour Mills on Monday as majority owner Tiger Brands cut funding support to its struggling Nigerian division.

    South Africa’s Tiger Brands said it was “currently exploring various alternatives with regard to its investment in Dangote Flour Mills, which also announced a change of name to Tiger Branded Consumer Goods Plc

    Aliko Dangote holds 10 percent of the company’s equity in through Dangote Industries.

    Reuters reported that other directors that resigned from Dangote Flour are – Olakunle Alake, Asue Ighodalo and Arnold Ekpe.

  • Tiger Brands writes off $82m in Dangote Flour Mills

    Tiger Brands writes off $82m in Dangote Flour Mills

    Tiger Brands Limited, South Africa’s largest food company, will write off about half of its investment in Dangote Flour Mills Plc, less than two years after buying a majority stake in the Nigeria-based producer.

    Tiger, which makes Jungle Oats and All Gold tomato sauce, will impair Dangote Flour’s value by 849 million rand, about $82 million, because of “underperformance” and “excess milling capacity that continues to increase in the Nigerian flour market,” the Johannesburg-based company said yesterday.

    The company bought a 63.5 per cent stake Dangote Flour Mills from Dangote Industries Limited in September 2012 for about $190 million, its third purchase in Nigeria. Tiger targeted acquisitions in Africa’s largest economy as it saw limited opportunities in its home market.

    The food producer sees earnings per share for the six months ended March 31 falling as much as 55 percent from a year earlier because of the write-off, it said in a statement. Excluding the impairment, profit from continuing operations will improve 6 percent to 10 percent, Tiger said.

    Bloomberg reported that Tiger Brands’ share price rose by 3.9 per cent, the most since May 31, to 287.67 rand by the close of trading in Johannesburg.

     

  • Tiger Brand mulls N3.16b takeover bid for Dangote Flour

    Tiger Brand mulls N3.16b takeover bid for Dangote Flour

    Tiger Brands Limited, a leading South African fast moving consumer goods company, will adopt tender offer as the means to acquire minority shares and raise its majority core investor’s stake in Dangote Flour Mills (DFM) to 70 per cent.

    An impeccable capital market source said Tiger Brands will adopt the optional tender offer in the scheme of acquisition, leaving the minority shareholders to individually decide whether to sell or hold their shares.

    The source noted that the South African firm, which had been on acquisition sprees in Nigeria including substantial stakes within Nigeria’s largest conglomerate-the UAC of Nigeria (UACN) Plc, was favourably dispose to tender offer to stave off shareholders’ discontent and protest that may trail other methods with strong element of compulsion.

    A similar bid by GlaxoSmithKline United Kingdom (GSK UK) to acquire additional shares in its Nigerian subsidiary-GlaxoSmithKline Consumer Nigeria (GSK Nigeria)by pro rata acquisition of shares from all Nigerian shareholders was widely rejected by Nigerian shareholders because of the compulsory surrender of shares implied by the pro-rata method in addition to complaints on the offer price. GSK UK was forced to indefinitely suspend the bid. Pro rata implies that every shareholder will have to surrender certain number of shares based on a predetermined equality percentage factor.

    Under tender offer, Tiger Brands will only elucidate the merits of its acquisition bid and present the terms of the acquisition-price, units and period, leaving the investors to decide on the acceptability or otherwise of the buy offer.

    Already, the book of members of DFM was closed yesterday following the cut-off date of Monday December 30, 2013 for qualification for participation in the takeover transaction. This implies that only shareholders in the register of DFM as at the close of business on Monday December 30, 2013 would be entitled to participate in takeover bid.

    Tiger Brands is seeking to take-over up to 332.5 million ordinary shares of 50 kobo each at a price of N9.50 per share from minority shareholders of DFM.

    A market source indicated that the equilibrium of the tender price of N9.50 and the stock market price might however detract from the attractiveness of the tender, forcing Tiger Brands to reconsider its offer price. DFM’s share price opened yesterday at N9.50 per share.

    The takeover transaction, which has already secured provisional approval of the NSE, will add 6.65 per cent equity stake to the majority equity stake of Tiger Brands, raising the majority controlling equity stake of the South African firm to 70 per cent. DFM currently has 5.0 billion ordinary shares of 50 kobo each outstanding share capital.

    Under the extant rule, a 70 per cent controlling equity stake would enable Tiger Brands to pursue strategic changes with little supports from minority shareholders. Extant Nigerian laws require 75 per cent shareholdings to approve such major changes.

    Dangote Group’s Dangote Industries Limited (DIL) had sold 63.35 of its equity stake in DFM to Tiger Brands in a $181.9 million. The deal saw transfer of3.17 billion ordinary shares out of Dangote Group’s 3.67 billion ordinary shares of 50 kobo each in DFM to the Tigers Brand.

    The transaction however still provided for Alhaji Aliko Dangote, President of the Group to retain his chairmanship of the board of the flour mills.

    The executed Share Sales Purchase Agreement (SSPA), which articulated the terms under which the Sale was consummated with Tiger Brands, provided that DIL will retain a strategic interest of 10 per cent of the total issued ordinary share capital of DFM for a minimum period of five years after implementation of the transaction during which the Group will have the right to appoint two directors to the board of DFM, with Alhaji Aliko Dangote continuing as chairman of the company.

    DFM has struggled with declining bottom-line over the years. It lost N3.8 billion during the first half of this year. Interim report and accounts for the six-month period ended June 30, 2013 showed that turnover inched up by 1.7 per cent, the company witnessed top-down cost pressures, which shaved 39.3 per cent off the gross profit and pushed the company to its worst loss over the years.

    Dangote Flour’s turnover stood at N29.38 billion in first half 2013 as against N28.89 billion in comparable period of 2012. Gross profit dropped from N4.13 billion to N2.50 billion. With operating expenses rising from N3.43 billion to N4.04 billion and financing costs of N2.10 billion in 2013 as against N1.68 billion in 2012, loss before tax ballooned from N749.05 million in 2012 to N3.77 billion in 2013. After taxes, net loss leapt from N464.53 million in 2012 to N2.30 billion. Loss per share thus increased from about 26 kobo in 2012 to about 108 kobo in 2013. The streak of losses further eroded the equity base of the company as shareholders’ funds dropped from N27.55 billion to N23.02 billion.

    Directors of the company blamed the worsening performance on what they described as significant challenges being faced by the business in the short term.

    According to the board of directors, sales volumes were impacted by intense competition arising from over-capacity of supply in the flour milling sector as well as unresolved debt issues, which have resulted in the moderation of credit extension to customers.

    The company stated that profitability was adversely affected by pricing pressures resulting from significant input cost inflation in the raw material cost of wheat, which has increased by 17 per cent and 15 per cent wheat levy imposed, which took effect on July 1, 2012.

    The company added that the results also reflected a one-off cost of N796 million due to the new management team’s focus on right-sizing of the business and the optimisation of supply chain efficiencies and product quality.