By Peter Egwuatu
PROMPTED by increased investor confidence in the Nigerian economy, especially in the stock market, positive economic growth outlook, fourteen companies quoted on the Nigerian Stock Exchange, NSE raised N340.6 billion via Rights Issues in 2017, in preparation for boom in economic activities in the post recession era.
Five of the companies dominated the Rights Issue boom accounting for 94 percent of the N340.6 billion. These are Lafarge Africa Plc 39 percent), Unilever Plc (17 percent), Union Bank Plc (15 percent), Guinness Plc (12 percent) and Flour Mills Nigeria Plc (12 percent).
This is in sharp contrast to the previous year, 2016, when declining economic growth and woeful stock market performance as well as foreign exchange uncertainty scared investors from the NSE and also companies from raising fresh funds either through public offer or Right Issue.
Financial Vanguard analysis revealed that 98 percent of the N340.6 billion Right Issues in 2017 occurred in the second half of the year (H2, 2017) when the economy had exited recession and the stock market was posting record year-to-date performance powered by dollar inflow from foreign investors taking advantage of the Investors and Exporters (I&E) Foreign Exchange Window as well as the rock bottom price of most shares on the NSE.
This trend, according to analysts and shareholders, who spoke to Financial Vanguard, is expected to continue this year, with more companies coming to raise funds either through Right Issue or public offer to expand their production capacity and modernise their operations so as to take advantage of the boom in economic activities expected from increased government spending this year.
These include banks seeking fresh capital to shore up their base in a bid to ensure they met the capital adequacy requirement of the Central Bank of Nigeria (CBN). Financial Vanguard analysis showed that four companies raised money via Right Issue in the first half of 2017 (H1’ 2017). These are UACN Property Development Company, UPDC Plc which raised N5.2 billion; Portland Paints and Products NigeriaPlc,PPPN N1.02 billion; Livestock Feeds, N750 million; and Meyer Plc N218 million.
For the second half, H2’17, the ten companies that submitted applications to the NSE and have commenced their Rights Issue fund raising are: Lafarge Africa Plc, N131.56 billion; Guinness Nigeria Plc, N39.7 billion; UACN Plc, N15.4 billion; Union Bank Plc, N49.75 billon; Unilever Nigeria Plc, N58.85 billion; and Flour Mills Nigeria Plc, N39.86 billion. Others are Mutual Benefits Assurance Plc, N2.0 billion; Consolidated Hallmark Insurance Plc, N500 million; Morison Industries Plc, N502 million; and Trans-nationwide Express Plc N239 million.
Rights Issues in H1’ 2017
UACN Property Development Company Plc offered 1,718,750,000 ordinary shares of 50 kobo each at N3.00 per share. The gross issue proceeds stood at N5.2 billion. The net proceeds of the issue, according to the company, were applied towards further development /completion of ongoing projects and acquisition of land to execute new projects.
Portland Paints opened its N1.2 billion Rights Issue on February 7, 2017 through a rights issue of 600 million ordinary shares of 50 kobo each at N1.70 per share. The provisional allotment for the Rights Issue is on the basis of three new ordinary shares for one ordinary share. The application list closed on Wednesday, March 1, 2017.
According to Larry Ettah, Chairman of the company, “We will apply the planned Rights Issue proceeds to minimise the debt exposure risks of our business as well as carry out targeted expansion in our operations. The business will focus on its growth brands as well as make the necessary investment in marketing to improve its brands’ awareness and visibility” he stated.
Livestock Feeds Plc, raised N750 million Rights Issue, involving 1,000,000,000 ordinary shares of 50 kobo each at N0.75 per share on the basis of one new ordinary share for every two ordinary shares held. The offer opened on Tuesday, April 18, 2017.
Paint manufacturer, Meyer Plc opened its Rights Issue of 291 million shares at 75 kobo per share. The offer opened on Monday 9th of January 2017 and closed on Wednesday, February 15, 2017. The shares of the company were allotted on the basis of one new share for every one share held. The proceeds of the offer were used for factory refurbishment and upgrade, working capital, and brand building and expansion.
Rights Issues in H2’ 2017
Lafarge Africa Plc: The Company had the highest Rights Issue since the stock market crashed in 2008. The Rights Issue of 3,097,653, 023 ordinary shares of 50 kobo each at N42.50 per share commenced on 20th November, 2017. The total value stood at N131.56 billion.
Guinness Nigeria Plc: The company had on March 24, 2017, through its stockbroker, Stanbic IBTC Stockbrokers Limited, submitted an application to the NSE for approval and listing of a rights issue of 684,494,631 ordinary shares of 50 kobo each at N58.00 per share on the basis of five new ordinary shares for every 11 ordinary shares held. The value totalled N39.7 billion. The qualification date for the Rights Issue was Wednesday 15 March 2017. The company stated that it intend to use the proceeds of the fund to deleverage its balance sheet given its relatively high debt level; finance its working capital needs; and expand its operations.
Unilever Nigeria: The company got shareholders’ nod at its annual general meeting (AGM) held Thursday, 11 May, 2017 to raise up to N63 billion by way of Rights Issue, subject to obtaining regulatory approval. The company finally raised N58.85 billion by offering 1.961, 709,167 ordinary shares of 50 kobo each at N30.00 per share on the basis of 14 new ordinary shares for every 27 ordinary shares held by a shareholder. The offer opened on July 31 and closed on Friday September 8, 2017.
Union Bank Nigeria Plc: The shareholders of Union Bank at its 48th AGM, held in Lagos charged the Board of Directors to issue 12,133.646,995 ordinary shares. Finally, the bank’s Rights Issue of 12,133,646,995 ordinary shares of 50 kobo each at N4.10 per share on the basis of five new ordinary shares for every seven ordinary shares held by a shareholder opened for subscription between September 20th and October 30th 2017.The total amount raised was N49.75 billion.
Flour Mills Nigeria Plc: The Company’s Rights Issue was expected to commence on 15th December, 2017 with a Right Issue of 1,476,142,418 ordinary shares of 50 kobo each at N27.00 per share on the basis of 9 ordinary shares for every 16 ordinary shares held by a shareholders. However, latest information on January 5, 2018 revealed that the NSE and Securities and Exchange Commission,SEC have just given approval to the board of the company for the offer . The total money to be raised stood at N39.86 billion
UACN Plc: The management and Board of UACN made proposal to help its subsidiaries to raise about N15.4 billion Rights Issue. According to a notice to the NSE, the Board of UACN said it needs an enhanced capital of N7 billion for Grand Cereals Limited; Livestock Feeds Plc (N0. 75 billion). The Board explained that these subsidiaries need working capital support during the procurement season of November/December, which their banks would not provide timely, thus endangering the performance of the subsidiaries.
UACN, finally issued 960,432,193 ordinary shares of 50 kobo each at N16.00 per share on the basis of one new ordinary shares for every two ordinary shares held by a shareholder.
Mutual Benefits Assurance Plc: The Company through its stockbrokers; Security Swaps Limited submitted an application to the NSE for approval and listing of a Rights Issue of 4,000,000,000 Ordinary shares of 50 kobo each at 50 kobo per share on the basis of 1 new ordinary share for every 2 ordinary shares held. The qualification date for the Rights Issue was Wednesday, 1 November 2017. The total amount for the Rights Issue amounted to N2.0 billion
Morison Industries Plc: The Company’s Rights Issue of 836, 983,123 ordinary shares of 50 kobo each at 60 kobo per share on the basis of 11 new ordinary shares for every two ordinary shares held by a shareholder commenced on September 5, 2017. The total value stood at N502 million.
Consolidated Hallmark Insurance Plc: The Company’s Rights Issue of 1,000,000,000 ordinary shares of 50 kobo each at 50 kobo per share on the basis of one new ordinary share commenced on 30th August, 2017. The total value stood at N500 million.
Trans Nationwide Express Plc: The Company’s Rights Issue of 298,230,000 ordinary shares of 50 kobo at N0.80 per share in the ratio of 3 to 2 ordinary shares held as at 25 January 2017 commenced on 23rd March, 2017. The total value stood at N239 million.
Factors driving the boom
Commenting on the resurgence and boom in Rights Issue capital raising by quoted companies, the Managing Director/CEO, High Cap Securities Limited, David Adonri , stated: “That the primary market was able to form that level of capital in 2017 through Rights Issue is heart warming. It means that the so much expected recovery of the Primary Market has begun. If the trend continues in 2018, it means that other methods of capital raising can become viable.
“Before the global meltdown, Issuers were raising over one N1 trillion of fresh capital annually in the Primary Market mainly through offers for subscription. There is high optimism that with recovery of the economy and stability of the secondary market, the primary market will perform much better in 2018.
“As the economy recovers from stagflation, confidence is gradually being restored in the capital market. Issuers’ confidence is also increasing hence, increase in primary market activities.
“If secondary market momentum is sustained, more activities should be expected in the primary market and we will see more companies raising fund in this year. The equity market is currently witnessing an uptick in activities. A combination of the change in asset allocation rules for Pension Fund Administrators (PFAs) and opening of a window for investors and exporters has led to a sustained rise in the price of equities. The rising appetite for equities means an equity offer may witness a high level of subscription.”
The Core Investor factor
In his own reaction, Managing Director/Chief Executive, APT Securities & Funds Limited, Mr. Kasimu Kurfi, cited the influence of foreign core investors in some multinational companies
He said “The recent coming of Rights Issues after a long break of public issues in the NSE is not a surprise to us. If you observed most of the companies coming with the Rights Issues, they have core investor among its shareholders. Most of the multinational companies rush for same, such as Guinness, WAPCO, Unilever and many others on the way to come.
“The reason for rise in Rights Issues are as follows: The new listing rule by the NSE allow a core investor to hold up to a maximum of 80 per cent instead of 70 per cent; devaluation of Naira by 50 per cent encourages multinational to convert their