May & Baker Nigeria Plc has announced plans to raise a new equity capital by offering new ordinary shares to existing shareholders.
The pharmaceutical company is seeking regulatory approval to raise N3 billion new equity fund. The rights issue of 980 million ordinary shares of 50 kobo each at N2.50 per share. The rights issue has been provisionally pre-allotted on the basis of one new ordinary share for every one ordinary share held as at the close of business on Tuesday, September 4, 2018.
Recall that the shareholders of the company at its 67th Annual General Meeting which was held in Lagos recently gave their nod to the board’s bid to raise capital. At the meeting, a proposed dividend payment of 20 kobo per share was also approved by the management.
Issues around the raising of new capital
It is rather interesting, yet puzzling that May & Baker Plc would even consider proceeding with dividend payment even when it is in apparent need of capital.
Recall that the company had earlier this year sold its food line to Dufil, a move the company said was necessary towards availing it the opportunity to access the much-needed capital towards the actualisation of its refocused business model.
Note that any truly concerned shareholder would understand the need to suspend dividend and plough profit back into sustaining a business when the need for that arises.
It continues to enjoy government patronage
The company recently announced the signing of an agreement with the National Institute for Pharmaceutical Research and Development (NIPRD) for the commercial production of NAPRISAN, an anti-sickle cell vaccine.
In 2016, during the economic contraction, the company lamented the scarcity of forex that affected the importation of its raw materials for the manufacturing of vaccine locally, despite the Federal Government of Nigeria’s pronouncement of a special allocation of forex for manufacturing firms in the country.
May & Baker was founded in 1944 and it is one of Nigeria’s foremost companies and the first in the pharmaceutical industry. Its shares are listed on the Nigerian Stock Exchange and are currently trading at N2.40, with its one year return down by 13.85%.
The timing of this offer is a major concern. The decline in stock market prices, lack of funds for many retail investors and the approaching elections (uncertainty in the polity). Perhaps T Y Danjuma intends to buy all the shares since he has a lot of cash and is the major shareholder