Nigeria’s largest and oldest conglomerate, UAC of Nigeria (UACN) Plc is scheduled to close the application list for its ongoing ₦15.4 billion rights issue this Friday, giving shareholders some 48 hours to pick their rights.
UACN is raising ₦15.36 billion through a rights issue of 960.43 million ordinary shares of 50 kobo each at ₦16 per share. The new shares have been pre-allotted to existing shareholders on the basis of one new share for every two shares held as at the close of business on Thursday October 19, 2017.
The application list for the rights issue opened on November 15, 2017 and it is scheduled to close on Friday December 22, 2017. There are indications the conglomerate may not extend the offer period.
After deduction of the estimated issue costs and expenses of ₦333.91 million, representing 2.2 per cent of the gross issue proceeds, the net issue proceeds is about ₦15.033 billion.
A breakdown of the utilisation of the net proceeds indicated that the largest chunk of the net proceeds of N15.03 billion will be invested in the Plateau State-based subsidiary-Grand Cereals Limited.
The board noted that due to increasing cost of raw materials and the planned investment by Grand Cereals Limited into the agricultural value chain, it has identified the need for equity injection into the subsidiary.
The planned ₦7 billion rights issue of Grand Cereals will be subscribed to by UACN to the extent of its 64.9 per cent holding in addition to any unsubscribed units. The total amount of proceeds to be used for this investment is approximately ₦5 billion.
Also, to further support Grand Cereals Limited’s expansion plans into the agricultural value chain, the board has identified the need for a shareholder loan of ₦3.5 billion to the subsidiary. However, the planned shareholder loan will be provided on commercial terms to Grand Cereals Limited and upon repayment at a future date will be deployed in the food and agro-processing categories of the group to enhance shareholder value.
About ₦4.8 billion will also be used to support the working capital of both the Grand Cereals Limited and Livestock Feeds Plc by part-financing inventory procurement during harvest season of grains and oil seeds. About ₦2.8 billion will be used for Grand Cereals Limited while ₦1.2 billion will be devoted to Livestock Feeds.
According to the conglomerate, the harvest season of grains and oil seeds usually starts in the last quarter of every year when the financial institutions typically adopt tight credit policies to achieve their audited balance sheet goals. The availability of the required funds in a timely manner at that particular time is a competitive imperative. The raw materials will be utilised in the course of the year by the two subsidiaries. Also, the transaction between UACN and the agro-processing subsidiaries will be on commercial terms and at arm’s length.
The conglomerate has also indicated that it would consider new acquisitions and mergers to further optimise the values of its existing businesses and take advantage of emerging opportunities in other sectors.
In a circular outlining the operational philosophy of the conglomerate and the purposes of the ongoing new capital raising, the board of directors of the conglomerate stated that it would “continue to explore merger and acquisition opportunities relevant to it businesses”.
The board of the conglomerate indicated it has earmarked ₦2.5 billion from the net proceeds of the ongoing rights issue for “product innovation and growth investment in existing markets and adjacent categories”.
According to the board, it is conscious of the fact that the recent economic downturn presents an opportunity for product innovation and growth investment in existing markets and adjacent categories.
“Management has been mandated to explore such value-optimising opportunities for investment consideration. The sum of ₦2.5 billion has been earmarked for this endeavour,” the company stated.
Nigeria’s oldest surviving business, UACN started business in Nigeria in 1879, well ahead of the 1914 amalgamation that created the current Nigerian nation. With 10 subsidiaries in key sectors of the Nigerian economy, the UACN Group consists of several active companies spreading through manufacturing, services, logistics and real estate sectors of the Nigerian economy. These include four quoted subsidiaries-CAP Plc, UACN Property Development Company (UPDC) Plc, Livestock Feeds and Portland Paints and Products Nigeria Plc; in addition to the parent company, UACN. UPDC Real Estate Investment Trust, which is also quoted on the NSE, is a subsidiary of UPDC.
UACN acquired Livestock Feeds and Portland Paints in 2013. Other members of the group included UAC Foods Limited, UAC Restaurants Limited, MDS Logistics Plc, Warm Spring Waters Nigeria Limited, Grand Cereals Limited, and Unico CPFA Limited. Listed in 1974, UACN is owned by some 185,000 shareholders. No shareholder holds five per cent and above other than Stanbic Nominees Nigeria, which hold 17.86 per cent equity stake.