Cement manufacturing giant, Dangote Cement Plc, Wednesday obtained the endorsement of its shareholders to launch a share buyback programme that will see the company shrink its outstanding shares by up to 10%.
The firm, reputed to be the biggest company on the Nigerian Stock Exchange (NSE) with a total market value of N2.945 trillion as of yesterday, had convened the Extraordinary General Meeting (EGM) to seek shareholders’ approval to remove up to 1.70 billion units of its 17.04 billion common stocks from circulation.
The programme is to be executed within 12 months, the programme explanatory statement says.
It was the first major corporate action the cement-maker would take since boardroom guru, Joseph Makoju, stood down as CEO and Michel Puchercos, a venerable management pundit in his own right, was fetched from Lafarge Africa Plc to take over leadership.
Sunny Nwosu, fouding National Coordinator of the Independent Shareholders Association, lauded the bold move, while saying Nigerian shareholders owed Dangote Cement a debt of gratitude for taking the share buyback decision.
“I think Alhaji Aliko Dangote is learning from Microsoft, where Bill Gates also buy back shares of Microsoft. I want to sincerely congratulate Aliko on this noble idea. In 2008, ISAN sponsored a seminar on share buy-back because of its value and importance. As shareholders, we have been clamouring for share-back for so many years and today Aliko Dangote has given us hope.
“This is very good as against the practice of share reconstruction that is being practiced by some Nigerian companies which never gave back anything positive to the shareholders. The share buy- back was practiced in Ghana with just few companies listed on its exchange.
“We are indeed very happy with this and we are also quite sure that with this that you have done today, you have proved yourself to be the best chairman of all the corporate companies in Nigeria. We will not disappoint you.We are very delighted because we know that this arrangement will lead to share price increase and more dividend for the shareholders,” Nwosu stated.
Mohammed Audu, aso a shareholder, is optimistic that the returns earned from the share buyback by shareholders will be reinvested.
“Aliko Dangote does not need this money. He is taking this decision because of the shareholders. The share buy-back will ensure that the value of our share will go up and we are also sure of getting better dividend. So, as you can see, all the shareholders here today voted unanimously in support of the motion. We voted for it and also thank Aliko Dangote for making us richer,” he observed.
The share buyback exercise is anticipated to catapult share value and deliver improved return on investment to shareholders given that the total available shares of the company will be reduced by as much as 10% once the process is consummated.
Because the stock market is largely driven by the law of demand and supply, reducing the supply of Dangote’s shares will likely spur a rise in its share price.
The buy back is expected to offer perks to the company’s shareholders in the following way:
- Increase long term shareholder value.
- Return cash to shareholders – through increase in Earnings Per Share and likely rise in dividend payout.
- Serve as valuable tool for managing capital structure and balance sheet efficiency
Share buyback has been a major option global corporate giants have been taking in recent times to deliver an improved shareholder value and return on investment to investors.
In 2018 alone, corporate America spent an unprecedented $806 billion (about N292 trillion) on share buyback, a figure pundits reckoned was bigger than a Facebook or an Exxon Mobil.
It was the highest level ever reached in American history until that time with global heavyweights like Apple, Oracle, Wells Fargo, Microsoft and Merk leading the pack.
Apple alone spent $74.2 billion that year, bringing its total ten year buyback spending to an incredible to $260.4 billion (about N94.265 trillion) at that point.
Goldman Sachs has predicted that 2019 figure for S&P 500 companies alone could hit $940 billion (over N340 trillion ).
On 2nd January, world’s biggest food company, Nestlé, announced it had spent about $20.7 billion (over N7.493 trillion) in repurchasing its own shares and that it planned to buy more until 2022.
Just yesterday, ASML Holding, currently the world’s largest supplier of photolithography systems for the semiconductor industry, revealed its intention to spend as much $6.66 billion (N2.415 trillion) on buying back its shares in the next three years.
Also yesterday, investment think tank hinted at JP Morgan’s (America’s largest bank and world’s sixth largest bank by total assets according to S&P Global) plan to commit a staggering $32 billion (N11.584 trillion) to share buybacks and payment of dividends.
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