In a notice sent to the Nigerian Stock Exchange (NSE), Affelka SA, the majority shareholder in 7-UP Plc, has proposed to buy out the outstanding shares not held by the company.
Affelka is offering to buy the shares at N112.70 per share for the 171,542,574 ordinary shares of 50 kobo each representing the 26.78% of the company’s issued share capital that it does not own.
The consideration is at a 15% premium on the last traded share price of the company on August 9, 2017, being the last business day prior to when the offer was proposed by Affelka SA.
The company has received the approval of the Securities and Exchange Commission (SEC), but the scheme is subject to the approval of the minority shareholders at a court ordered meeting and a Federal High Court respectively.
7Up shares are currently trading at N92.50 in today’s NSE trading session. Affelka SA is a holding vehicle for the El-Khalil family which founded the company.
Why is Affleka SA proposing a buy out ?
The press release did not state a reason, however acquisitions like this bother around control.
Having a 100% stake in the company will allow Affleka, to exert greater control on the company, and most likely delist from the NSE.
Delisting from the exchange relieves the company of the pressure of paying dividends, enabling it to retain cash for future projects.
Delisting also means the company will not have to pay annual fees and levies required by the NSE.
Minority shareholders could kick
Minority shareholders are most likely to kick against the move, if they find the premium unappealing. Similar deals have often faced shareholder resistant resulting in adopting means such as rights issues.
7Up shares are down 28.9% year to date under -performing the NSE All Share Index which is up by over 30%.
The company reported a N10 billion loss last year and failed to pay a dividend for the first time in five years.
Results for the half year ended September 2017 show the losses have continued as the company made a loss before tax of N6.2 billion.
7UP shares are currently trading at N92.50 in today’s trading session of the NSE.
Here is a copy of the notice
7-UP Plc was incorporated as a private limited liability company on 25th June, 1959 under the name Seven‐Up Limited by Mohammed El-Khalil. On 16th May, 1960, the name was changed to Seven‐Up Bottling Company Limited and in 1978 it became a public company. 7-UP Plc was listed on the NSE on June 1st, 1986. The name “Seven‐Up Bottling Company PLC” was adopted on 26th November, 1991 in compliance with the provisions of the Companies and Allied Matters Act 1990.