Nigeria: Heineken bids to increase its controlling equity stake in Champion Breweries to 76%

Investors appeared ecstatic over the bid by Heineken to acquire about 1.197 billion ordinary shares of 50 kobo each in Akwa Ibom-based Champion Breweries, a move that may increase the controlling equity stake of the Netherlands-based Heineken in the Nigerian brewer to about 76 per cent, The Nation reported on October 18.

Champion Breweries closed weekend as the highest gainer for the week, in terms of percentage, with a gain of 49.52 per cent to close at N3.14 per share. Market analysts said investors were responding to the takeover bid with expectation that Heineken will offer premium price to attract investors. However, the company has not indicated the offer price for the MTO.

In a regulatory filing at the Nigerian Exchange (NGX) Limited, Heineken, through its wholly-owned subsidiary, Raysun Nigeria Limited, indicated that it plans to acquire 1.197 billion ordinary shares or about 15.3 per cent additional stake in Champion Breweries under a mandatory takeover bid (MTO).

Heineken holds the majority equity stake in both Nigerian Breweries and Champion Breweries, which are both quoted on the NGX. Heineken, through Raysun Nigeria Limited, holds 60.7 per cent majority equity stake in Champion Breweries. Akwa Ibom State holds 10 per cent equity stake while other Nigerian shareholders hold 29.3 per cent equity stake.

Champion Breweries’ shareholding base of 7.83 billion ordinary shares of 50 kobo each include 4.75 billion for Raysun Nigeria, 782.9 million ordinary shares for Akwa Ibom State and 2.29 billion ordinary shares for other investors.

The acquisition of the full MTO target of 1.197 billion ordinary shares will increase Heineken’s Raysun Nigeria’s shareholding from 4.752 billion shares or 60.7 per cent to 5.949 billion ordinary shares or about 75.99 per cent equity stake.

The MTO was triggered by the directives of Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), in line with the provisions of Section 131, Part XII of the Investment and Securities Act, No. 29, 2007 and Rule 445 of SEC Rules and Regulations, 2013.

Section 131 of the Investment and Securities Act (ISA) and Rule 445 of SEC make it mandatory for any institution or person that acquires at least 30 per cent of a company to make an MTO to other minority shareholders. There are however exemptions in few instances.

In a statement signed by Chairman, Chairman Breweries Plc, Dr Elijah Akpan, the company noted that the board of Raysun Nigeria had on May 10, 2021, granted approval for the MTO to be made to all the other shareholders of Champion Breweries other than Raysun Nigeria.

“Raysun has received the SEC’s authority to proceed with the offer and will file the offer document with the SEC for registration. Following the registration, Raysun will making a tender for the offer shares, which the shareholders may accept at their discretion,” the company stated.

Shareholders of Champion Breweries had urged Heineken to merge Champion Breweries with Nigerian Breweries to create synergies that could deliver greater values to all stakeholders.

Shareholders had said the ongoing consolidation in the breweries sector had placed a multiple-entities strategy in disadvantage as major investors such as SABMiller and Diageo consolidate their operations in Nigeria to create critical mass that can drive turnover in the increasingly competitive market.

President, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie, had said Heineken should, without delay, set in motion the process to merge Champion Breweries with Nigerian Breweries in order to optimise the potential of the Akwa Ibom State-based company and bring benefits to minority retail shareholders.

According to him, while Heineken derives indirect benefits through its management and inter-member contracts within the group, minority shareholders have not been able to benefit from the turnaround because the company lacks the scale to compete profitably.

Champion Breweries’ principal activities now consist of contract brewing services to Nigerian Breweries as well as brewing and packaging of Champion Lager Beer and non-alcoholic Champ Malta.

Okezie noted that with the envisaged increased competition in the industry, Champion Breweries lacks the network and scale to stand alone, adding that the company will do better with combination of its business with Nigerian Breweries.

Another shareholder, Mr Anthony Omojola, a leading member of the Independent Shareholders Association of Nigeria (ISAN), said the merger of Champion Breweries with Nigerian Breweries is the best likely thing to happen as such will be in line with the global best practice when it comes to unlocking synergies.

He said the common majority core investor in the two breweries should make the process of business combination smooth.

Another shareholder, Mr. Michael Cole, described Champion Breweries as a baby in the increasingly competitive breweries industry noting that it lacks the market penetration needed to profitably compete in the industry.

He urged the directors of the company to consider all options and go the extra mile to create better values for shareholders.

Responding to shareholders’ remarks, Chairman, Champion Breweries, Dr Elijah Akpan, had said the company had seen stronger competition with ongoing mergers between brewing giants in the world, which lead to more innovations and inflow of new brands in the market.

He however noted that the outlook for the Nigerian breweries sector remains bright because of the country’s large and varied opportunities.

“We shall explore the available possibilities the Nigerian business environment is offering to increase our market share within our business region. Considering our present financial position from deficit to surplus, our company has the right mindset and structures to achieve payment of dividend to you our esteemed shareholders in no distant future. We remain resolute in continuously achieving cost optimization and innovation for increased profit,” Akpan said.

Akpan assured that the board and management of the company are working on a long-term vision that will ensure that the company becomes profitable to the extent of paying dividends to shareholders.

19 October, 2021