Business

Diageo reduces interest in Guinness Nigeria by 15%

Diageo reduces interest in Guinness Nigeria by 15%

Fear that the parent company of Guinness Nigeria, Diageo, has concluded plans to reduce its share holding in the company became clearer on Wednesday as it confirmed that its application is before the Nigerian Stock Exchange for approval to sell off about 15 per cent of its equity holding, worth about $130 million.

Guinness chief executive officer, Peter Ndegwa, told newsmen that the board of Diageo said it would issue the shares to existing shareholders at 58 naira each, a 21 percent discount.

He did not elaborate on the reported intension of the foreign parent company to reduce its interest in Guinness Nigeria since the economic meltdown.

But the CEO said each Guinness shareholder would be given the opportunity to acquire five new shares for every 11 held.

It was learnt that the company, which is 54 per cent owned by Diageo, reported a pretax loss of 2.35 billion naira for the year ended June 30 ,2016, its first annual loss in 30 years, which is said to have triggered the desire to reduce foreign shareholdings in it.

But some analysts described the move as a mark of lack of confidence that with the eminent exit of recession, Nigerian-based firms would soon bounce back into buoyancy.

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One of the major shareholders, who refused to be named said: “We are still proud of our company, even if the foreign partners fully divest from it, we will not allow Guinness to die”.

But Ndegwa told journalists that expectation of the company is that the exercise should rather be seen as a firm offering rights issue to help it reduce the impact of increasing finance costs, expressing hope it will also assist in improving the balance sheet of the company’s financial records.

Guinness Nigeria shares, which have fallen 18 per cent so far in the first quarter of 2017, picked 2.9 per cent to 70 naira on Wednesday. The stock fell 31 per cent last year.

In October 2016, Diageo scrapped plans to increase its stake in Guinness Nigeria due to the tough conditions in one of its biggest markets for the world-famous stout. But it granted the Nigerian division a $95 million loan facility to help it cope with the dollar shortages.

The mother company has recently said it intended to convert all outstanding loans granted to Guinness Nigeria into equity via the rights issue, which it maintianed will strengthen the company’s financial base over the weakened naira over dollar.

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