Diageo steps down Guinness shares acquisition after historic loss

Diageo Plc, majority core investor in Guinness Nigeria Plc, has withdrawn from its bid to acquire more shares in the Nigerian subsidiary citing the challenging market conditions in Nigeria. 

The decision comes on the heels of recent declaration of a loss of N2 billion, its first loss in 30 years.    

Diageo had in September 2015 announced that it was considering acquiring 15.7 per cent additional equity stake in Guinness Nigeria through its wholly owned subsidiary, Guinness Overseas Limited.

Guinness Nigeria said it has received a letter from Guinness Overseas Limited confirming that Diageo has taken the decision not to proceed with the acquisition bid.

The company premised the decision on “the challenging market conditions in Nigeria over the past 12 months”. Rather, Diageo said it would focus its resources in continuing to support Guinness Nigeria.

Company secretary, Guinness Nigeria Plc, Mr. Rotimi Odusola, in a statement noted that notwithstanding the withdrawal, Diageo remains positive on the outlook for Nigeria in the long-term as it expects the market to continue to grow.

“Nigeria remains a key strategic market for Diageo which remains supportive of Guinness Nigeria, its board and management and the actions taken by Guinness Nigeria to mitigate the impact of challenging market conditions,” Guinness Nigeria stated.

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Guinness Nigeria Plc recorded a net loss of N2.02 billion in the immediate past year, its first loss over three decades. 

The audited report and accounts of Guinness Nigeria for the year ended June 30, 2016 showed that the company recorded a loss before tax of N2.35 billion in 2016 in place of profit before tax of N10.8 billion in 2015. Net loss stood at N2.02 billion in 2016 compared with net profit of N7.79 billion in 2015. The turnover of the multinational had dropped by 14 per cent from N118.5 billion in 2015 to N101.97 billion. 

In January 2016, Guinness Nigeria acquired the distribution rights for Diageo, its parent company’s International Premium Spirits (IPS) like Johnnie Walker, Ciroc and Baileys in Nigeria. 

Also in the course of the financial year, the company acquired the rights to distribute brands from India’s United Spirits Ltd (USL) for brands like McDowell’s whisky. 

Guinness has also announced an investment of GBP12m into its Benin plant for the manufacture of mainstream spirits, locally produced spirits that are offered at a lower price point when compared to imported spirits. 

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