…May delist from NSE
By Omokehinde Joshua
The majority shareholder of 7Up Bottling Company, Affelka, proposed to buy out minority shareholders of the company at N112.7 per share, translating into 18% premium relative to its current price of N97.12 per share. The company has a total outstanding shares of 640,590,000 units distributed into 73.23% and 26.77% between majority and minority shareholders respectively.
This translated into 469,090,000 and 171,500,000 units of shares held by the two classes of shareholders. If this proposal is successful, an amount equivalent to N19.328billion will be required to buy out the minority shareholders. The intention of this proposal is for the shareholders to apply for delisting from the official list of The Nigerian Stock Exchange, changing from a public to a private limited company. However, we can see some deliberate move to deprive the minority shareholders by the majority shareholders from the historical behavior of the stock prices from the last quarter in 2014 to first quarter in 2017. 7Up share traded as high as N197/share in October, 2015, from where it started declining to as low as N76.01 on March 24, 2017; the lowest since February 2014. This was ascribed to the volatility in the foreign exchange market resulting from the decline in the prices of crude oil, the major source of foreign exchange revenue to the government. Consequently, 7Up began to post negative earnings (or loss) of N10.776billion for the year ended 31st March, 2016, losses of N1.557billion, and N4.843billion for Quarters 1 and 3- 2017 with a view to discourage the minority shareholders. This is purely asymmetric information against the minority interest. The company is trying to play safe, observing the Nigerian Stock Exchange Rules of delisting and compensation to minority shareholders. They also want to increase their holdings having exhausted the limit by NSE rule. Now when stability has returned to the FOREX market and now the best time for the company to post positive and good earnings, comes with proposal to buy out minority shareholders. If the proposal will be accepted, the premium must double the 18% proposed.