Guinness Nigeria starts $126 mln share sale to cut funding costs

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Last year Guinness acquired the rights to distribute Johnnie Walker whisky and Baileys liqueur in Nigeria and commissioned a 4.7 billion naira production line at one of its plant to produce spirits locally.

LAGOS, July 4 – Guinness Nigeria on Tuesday launched a share sale to raise 39.7 billion naira ($126 million) from existing shareholders to help lower its financing costs after reporting its first annual loss in 30 years last year.

The beer maker, the local division of the world’s leading spirit maker Diageo, said funds raised will support Guinness in executing its strategy in the face of a recession in Africa’s biggest economy.

Guinness plans to issue five new shares to existing shareholders for every 11 held at 58 naira each, a 10.2 percent discount to Tuesday’s market price of 64.57 naira.

“Our expectation is that funds raised will help mitigate the impact of increasing finance costs, optimize our balance sheet and improve the company’s financial flexibility,” Chief Executive Peter Ndegwa said in a statement.

The company, which is 54 percent owned by Diageo, reported in September last year a pretax loss of 2.35 billion naira for the year ended June 30, its first annual loss in 30 years, triggering the share sale.

Shareholders approved the sale in January. It said it had also received the green light from the Securities and Exchange Commission and the Nigerian Stock Exchange.

Guinness Nigeria shares, which have fallen 18 percent so far this year, shed 4.99 percent on the Lagos bourse on Tuesday. The stock fell 31 percent last year.
The company plans to raise N39,700,688,598 by way of rights to existing shareholders, on the basis of 5 new shares for every 11 shares held by shareholders, whose names appeared in the register of members of the Company as at 15 March 2017 at an issue price ofN58 per share. The issue price represents a discount of 15% per cent to the Company’s closing share price on 14 March 2017, being the last day prior to the announcement of the proposed Rights Issue by The Nigerian Stock Exchange.

Commenting, Peter Ndegwa, MD of Guinness Nigeria Plc said: “This Rights Issue will allow the Company to deliver on its strategic objectives and give all our shareholders a unique opportunity to increase the number of shares they hold. Our expectation is that funds raised will help mitigate the impact of increasing finance costs, optimize our balance sheet and improve the company’s financial flexibility.”

Babatunde Savage, Chairman, Guinness Nigeria Plc, stated that this process is part of the Company’s long term plans to continue to invest in its business in Nigeria, commenting, “We have been here in Nigeria for 67 years and, while it has been challenging in recent times for many Nigerian businesses, we remain committed to this market as evidenced by our decision to offer this Rights Issue. We are grateful for the support that we have received from our shareholders and other stakeholders up to this point.”

Guinness Nigeria Plc has also been a champion for community development recently. Leveraging its flagship ‘Water of Life’ scheme, the company has delivered 35 water facilities across 24 states in Nigeria. These facilities have helped provide clean drinking water for over 1.5 million Nigerians.

Stanbic IBTC Capital Limited is acting for Guinness Nigeria Plc as Issuing House for the Rights Issue. Full terms of the Rights Issue will be set out in a Rights Circular to be mailed directly to shareholders of the Company, which contains a Provisional Allotment Letter and the Participation Form.

The Company urged investors to read the Rights Circular and where in doubt, consult their Stockbroker, Fund/Portfolio Manager, Accountant, Banker, Solicitor, or any other professional adviser for guidance before subscribing.

Last year, Guinness Nigeria Plc became the first total beverage alcohol company in Nigeria by acquiring the rights to distribute international premium spirits like Johnnie Walker whisky and Baileys liqueur in Nigeria and later commissioning a N4.7billionspirits line for locally manufactured spirits at its Benin plant.

Africa’s top oil producer last year entered its first recession in 25 years, brought on by low oil prices, which have slashed government revenues and crippled dollar supplies in the country.

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