Breaking… Dangote bids to repurchase former Dangote Flour Mills

Alhaji Aliko Dangote’s Dangote Industries Limited (DIL) has entered into a definitive agreement to repurchase the former Dangote Flour Mills Plc, now re-branded Tiger Branded Consumer Goods (TBCG) Plc, from the divesting South Africa’s majority core investor, Tiger Brands Limited.

Tiger Brands Limited had in November announced that it had decided to stop financing the ailing TBCG and was considering possible alternative for the resolution of its investment in the company, including partial or full divestment.

Regulatory filing obtained now by Ripples Nigeria indicated that Tiger Brands and Aliko Dangote’s DIL have been in discussions in respect of Tiger Brands’ shareholding in TBCG and have now reached an agreement regarding the terms of a transaction, which will see the sale of the foreign core investor’s 65.7 per cent shareholding to DIL.
Under the terms of the Share Sale and Purchase Agreement (SSPA) between the two parties, DIL will provide TBCG with an immediate cash injection of N10 billion and in return, Tiger Brands will divest its 65.7 per cent shareholding in TBCG to DIL for a nominal consideration and write off its shareholder loans to TBCG. Besides, Tiger Brands will assume and settle outstanding debt guaranteed on behalf of TBCG.

The former directors of TBCG Messrs Olakunle Alake, Arnold Ekpe and Asue Ighodalo, who had resigned alongside Aliko Dangote from the board of TBCG, also agreed to re-join the board of TBCG and were consequently reappointed with effect from December 10, 2015.
The terms of the transaction would be set out in a Share Sale and Purchase Agreement (SSPA), which will be submitted to the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE).

“Transaction and its terms have to be considered and approved by the Securities and Exchange Commission (SEC), in accordance with regulatory requirements. The parties will, as soon as is practicable, submit details of the transaction and the SSPA to SEC for approval. Apart from the approval of the SEC, implementation of the transaction will also be subject to the fulfilment of certain conditions precedent, including approval of the Exchange Control Division of the South African Reserve Bank,” the filing, signed by TBCG’s company secretary, stated.
The company said it decided on the repurchase agreement to ensure that TBCG is maintained as a viable going concern, able to retain its employees and meet its obligations to its stakeholders.
It noted that the share sale transaction envisages that sufficient capital will be injected into TBCG in order to stabilise the business and place it on a sustainable path aimed at creating value for its stakeholders.

Most analysts see the repurchase agreement as a bitter pill for the South African investor, but said it has no viable option in the win-some or lose-all scenario of the former Dangote Flour Mills.
South Africa’s largest food company-Tiger Brands Limited, last month said it has decided not to provide further financial support to the Nigerian company, which it has now rebranded as Tiger Branded Consumer Goods Plc.

Regulatory filing obtained by Ripples.com.ng showed that Tiger Brands Limited had informed the board of the newly renamed Tiger Branded Consumer Goods Plc that it “has reached a decision not to provide any further financial support with respect to its investment in Tiger Branded Consumer Goods Plc”.

The decision climaxed a long-running discontent between the core investor and the former core investor in the company, Alhaji Aliko Dangote. Aliko Dangote’s Dangote Industries Limited (DIL) had in September 2012 sold 63.35 of its equity stake in DFM to Tiger Brands in a $181.9 million deal. 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 Share Sales Purchase Agreement (SSPA) however still provided for Dangote to retain his chairmanship of the board of DFM. According to the SSPA, 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.

The decision by Tiger Brands Limited to cut off further funding for the lose-making subsidiary appeared to have triggered a major corporate crisis as Alhaji Aliko Dangote and his Nigerian team including Mr. Olakunle Alake, Mr. Asue Ighodalo and Mr. Arnold Ekpe resigned their appointments as directors of Tiger Branded Consumer Goods.

As at press time, the remaining members of the board of directors of Tiger Branded Consumer Foods were said to be considering the implications of the resignation of the Dangote team and other key decisions in order to make further decisions on the future of the Nigerian subsidiary.

Tiger Brands Limited was said to be exploring various alternatives with regard to its investment in Tiger Branded Consumer Goods as the South African firm struggles to stem the adverse impact of the Nigerian subsidiary on the group performance. Tiger Brands Limited had written off about half of its investment in DFM, less than two years after buying a majority stake in the Nigerian company. Tiger Brands stated that it decided to impair DFM’s value by 849 million rand, about $82 million, because of “underperformance”.

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