Guinness Nigeria Problems Persist As Internal Crisis Stops Fund Raising Efforts


There are fresh indications as to why Diageo Plc, the parent company of Guinness Nigeria Plc, failed in its bid to increase its share capital in the brewery giant.

It may be recalled that Diageo had in mid September 2015 announced its intention to make an offer through its wholly owned subsidiary, Guinness Overseas Limited for up to 15.7% of the share capital of Guinness Nigeria Plc.
The
Nation gathered that everything seem okay as the different parties worked out the finer details of the deal.
However, trouble began to brew when some local shareholders vowed to resist any move to sell more shares to the parent company under any guise.
Convinced about what it considered the impropriety of the proposed deal, the shareholders set machinery in motion to thwart the plan thus leading to a stalemate.
Not happy with the turn of event in spite of making several entreaties to pacify the aggrieved shareholders, Diageo naturally soft-pedalled and it subsequently communicated its decision not to go any further with the potential offer to Guinness Nigeria Plc.
Further checks at the Nigerian Stock Exchange by The Nation revealed that Guinness Nigeria Plc had received a letter from Guinness Overseas Limited confirming that Diageo had taken the decision not to proceed with the potential offer.
However the major reason Diageo adduced for its decision to back down was its fears over the seeming challenging market condition in the country over the past 12 months.
But despite its inability to increase its shareholding in Guinness Nigeria Plc, Diageo assured that it maintains a positive outlook for Nigeria in the long-term just as it proposed to focus its resources on continuing to support Guinness Nigeria Plc.
Thus to enable Guinness Nigeria Plc tide things over in the face of the strangulating economy already having a negative run on its operations, the company got the nod of its shareholders for a rights issue to raise at least N40billion fresh cash injection into the business from the capital market.
The rights issue is the first in 25 years.
Justifying the need for the rights issue, Babatunde Savage, Chairman, Guinness Nigeria Plc, during its Extra Ordinary General Meeting in Lagos, said: “”Guinness Nigeria has been in this country for over 60 years and, in that time, we have continued to add significant economic and social value to Nigeria and Nigerians. We believe this Rights Issue will positively impact on the financial performance of Guinness Nigeria and help mitigate the impact of increasing finance costs in what continues to be a challenging economic environment in Nigeria.”
Echoing similar sentiments, Peter Ndegwa, Managing Director/CEO, Guinness Nigeria Plc said that the company has good fundamentals and potentials for the future. “Guinness Nigeria is a company with excellent fundamentals and we have the right strategy and the right people to grow our business for the future. This Rights Issue in combination with our productivity and cost optimisation drive will help provide the fuel to continue to build this business for Nigeria and Nigerians.”
On insinuations that the rights issue may be a further ploy to help Diageo raise its stake in the company, Ndegwa said such claims were totally unfounded.
According to him, the rights issue allows every single shareholder to subscribe for rights based on their current shareholding. So if every shareholder in Guinness Nigeria Plc subscribes for their rights, everyone would keep their current shareholding. So, it is not that we are raising new capital by other means. There is no way if everyone subscribes to the Issue that we can increase the shareholding value of Diageo.”
The rights issue, he emphasised, “Is meant to support the company to grow, it’s about bringing cash into the business therefore shareholders should feel that this is an opportunity to a business that has been very strong and has paid dividends for many years.”
thenation

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