Raysun Nigeria Limited has triggered a mandatory takeover of Champion Brew, as the investor is set to increase its ownership stake to 100.01 percent, a year after it held 60.4 percent in the brewer.
As of 2020, Champion Brew shares were split between Assets Management Nominee (12.3 percent) Akwa Ibom Investment Corporation (10 percent) and other minority shareholders, with Raysun holding the majority shares (60.4 percent).
But the core investor has been taking steps for a takeover, as earlier this year, Raysun had increased its control of Champion Brew by acquiring more shares to take its stake to 84.71 percent, according to FY 2020 financials of the company seen by Ripples Nigeria.
Raysun will soon hold the total 7,829,496,464.00 ordinary shares of the brewer, as new filing to the investing public and NGX on Tuesday, shows that 1,196,799,164 ordinary shares (representing 15.3 percent) held by other shareholders will now be acquired by the majority investor.
While the aggregate offer price for the proposed stake acquisition has not been stated by the Akwa Ibom-based company, Champion Brew share price value is currently at N2.3 kobo per share, which means it will cost Raysun N2.75 billion to acquire the remaining 15.3 percent control.
This will bring Raysun’s investment value in the producer of Champion lager beer and Champ Malta to about N18 billion, and gives it total control over the brewer’s operation once the deal is completed.
Why Raysun’s takeover bid is important?
Quoted companies on the Nigerian stock exchange are required to have 20 percent free float shares available for the public to acquire, however, Champion Brew has been unable to meet the requirement.
In August 2019, the NGX, which is the capital market authority, gave the company a grace period of two years to achieve the free float outstanding shares, which means its majority shareholder is expected to part with some shares or the company conduct its stock split to increase the number of outstanding shares.
However, it seems Champion Brew is looking to offload the burden of having to sell off or conduct a stock split by going private, hence, Raysun moving to acquire 100 percent shares.
Ripples Nigeria understands Raysun’s takeover means there won’t be any outstanding shares available in the public, which goes against the listing rules of the NGX. This points to one direction; delisting seems to be on the plan of Champion Brew.
Impact of Raysun’s takeover on Champion Brew’s market value
Since Raysun’s intention to takeover the company, Champion Brew’s market value has been up by 170.5 percent year-to-date, as shareholders sell at a high price to exit the brewer amid profit-taking.
As of January 5, Ripples Nigeria analysis put Champion Brew’s market valuation at N6.65 billion, but this figure rose to N18 billion as of October 11, gaining N11.35 billion in ten months.
This means Champion Brew share price has gained 1.45 percent between Q1 and first month of Q4 2021 within the period of the takeover by Raysun.
Resignations and new appointments loom
The takeover is expected to cause changes on Champion Brew’s board of directors, as representatives of the minority shareholders will have to exit their role as the company takes a new path from public to private.
New representatives of Raysun are likely to come on board to effect the plans of the sole investor of the company.
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