With two companies and a majority shareholder in another, currently billed for delisting from the Nigerian Stock Exchange and perhaps more intending to do so soon, the management of the bourse must look beyond its drive to achieve a higher market capitalisation through increased listing. Just as it's striving to attract more companies in some strategic sectors of the local economy, the exchange must simultaneously design and implement policies to improve the post-listing environment to retain the companies. Doing otherwise could amount to a negation of its target and indeed a disservice to shareholders whose interests might be jeopardized by the planned exit.
When Oscar Onyema decided to quit his job as the Chief Administrative Officer and Senior Vice President of America Stock Exchange, Amex, to finally take over the running of the Nigerian Stock Exchange, NSE, last March, he was full of enthusiasm and expectations. He was enthusiastic about turning around the fortunes of the Exchange and transforming it into a leading platform that would be the gateway for investments inflow into Africa.
He was also not doubtful of the challenges he could face, especially given the bad patch the Nigerian stock market has gone through since 2008. Since the global financial crisis that peaked in 2009, the Nigerian stock market has fallen from an all-time high in 2008 and has been unable to recover fully. Onyema is optimistic that the fortunes of the market will turn around, as the new management strives to attract new listings, including companies operating in oil exploration and production and telecom operators on the bourse
However, he never expected this very disturbing new trend that is staring him in the face: the growing quest by listed companies to quit the Exchange and operate as private companies
Before Onyema resumed as the Chief Executive Officer of NSE on April 4, 2011, leading soft drinks bottler, Nigerian Bottling Company, NBC Plc, had notified the Exchange of its intention to delist and become a private company.
When asked to respond to the plan by the NBC to quit the Exchange during his maiden press briefing, Onyema declared that across the globe, companies list and delist from the stock exchange, depending on their suitable strategies for existence.
“If we are going to be in the global market, we cannot stop companies from strategic entry and exit from the market if they wish,” he said, adding the Exchange would rather focus on enhancing operational efficiency, technology and supporting infrastructure, capacity building efforts that would make companies remain listed on the Exchange.
But less than two months after his assurance, Nampak Plc, a packaging firm with South African parent, is also on its way out of the Exchange. The shareholders of Nampak recently gave their approval to the planned delisting.
Just as stakeholders are still grappling with the reality of the reduction in the number of quoted companies, Longman Nigeria Plc is standing on a shaky ground as its parent firm- Pearson Plc of United kingdom (UK), has decided to divest from the publishing firm.
Market watchers said that ordinarily the news of a foreign firm parting ways with its local partner should not raise much dust. But the fact that the foreign partner would eventually become a competitor to its former partner, they said, was worrisome.
A market analyst contended that given the plans of Pearson to operate in Nigeria as a separate entity in the same industry, the chances of Longman surviving without the technical and financial support of the UK partner were very slim.
To some analysts, the death knell of Longman has been sounded
“I can tell you that we are on the verge of losing another company on the Exchange. It will be difficult for Longman Nigeria Plc to compete with Pearson. Technically, the NSE has lost another company because I do not see the company sustaining its past performance without the support of Pearson,” a senior stockbroker told Business Eye.
Already the news of Pearson's divestment from Longman Nigeria impacted its equity negatively few days after the announcement. The shares of Longman dipped by over 24 percent within two weeks as restive investors dumped the shares.
The fear and anxiety of the investors may be justified, considering how Pearson plans to operate in Nigerian, which is going to be a big threat to the operations of Longman.
Pearson, which is the world's leading learning company with a portfolio that includes Penguin, Dorling Kindersley had said that over the past three years it had gained a much deeper understanding of the Nigerian education system
The company noted that its global strategy embraced not only excellent curriculum content for schools and universities, but also assessment, teaching, training, academic, professional qualifications and certification and technology.
“We have been working hard with the other shareholders in Longman Nigeria to bring about this vision and align the business to this global strategy and help meet the educational needs of the Nigerian people. However, following a detailed review of the Longman Nigeria business and its environment, it is with great sadness that we have concluded that to truly deliver this vision Pearson needs a new, more diverse approach to the way we work enabling us to focus on the new opportunities we see in Nigeria.
“Our review of Longman Nigeria covered the full range of considerations, including market positions, structure and characteristics; growth prospects; investment requirements; business practices, financial metrics and synergies with other parts of Pearson. We also reflected on the constraints that being a majority shareholder rather than outright owner of the company had and concluded that we were more comfortable having complete visibility and control over these considerations.
“As a result, we have decided to part company with Longman Nigeria and plan to divest our stake in the company in due course,” the company said.
Pearson said that it would establish a new company in Nigeria later this year that would be working directly with schools, colleges and universities, teachers, students and parents.
While the management of the NSE still has the consolation that Longman is still listed on the Exchange, the same cannot be said about NBC and Nampak, which are almost out of the Exchange.
Already shareholders of Nampak have approved the planned delisting of the company from the NSE at the court-ordered meeting held in Lagos recently. The Nampak shareholders are to be paid N5.50 per share as against the current market price of N4.30. In what appears to be medicine after death, the Chairman of Nampak, Matthew Akinlade, told to the shareholders that although Nampak Nigeria Plc would be delisted from the Exchange, it remained a Nigerian company with majority Nigerian employees.
Similarly, the Nampak International's representative, Charles Bromley, reiterated the company's commitment to Nigeria, adding that significant investment would be made by Nampak International of South Africa, to upgrade and expand Nampak Nigeria's existing facilities.
Just like the shareholders of Nampak, those of NBC are expected to approve the delisting of the company at a court ordered meeting scheduled to hold in Lagos on Friday July 22, 2011. The shareholders are to get N47 on each 50 kobo share that traded at N40.90 for the week ended Friday June 24, 2011. This translates into premium of about 15 percent.
However, some shareholders have kicked against the delisting of NBC, saying they would not give up their shar
For instance, shareholders of the company under the aegis of Independent Shareholders Association of Nigeria, ISAN, were quoted to have maintained their opposition to NBC's decision.
The General Secretary of the association, Adebayo Adeleke, said: “We have made our position very clear. We are not going to sell our shares. We are not talking about whether or not the price is right. Members of ISAN are opposed to the planned delisting because the reasons are not genuine. Besides, if NBC is allowed to delist because of such an excuse, other companies would follow and it is not healthy for our economy and the capital market in particular.”
According to him, NBC has been in business in Nigeria for about 60 years and it is only the Nigerian minority shareholders that have stood by them and made the company grow to this level.
“Whatever value attributable to the shares of NBC was created by minority shareholders. The technical partners hold their shares in bloc and do not trade them,” he said.
Speaking earlier, the National Coordinator of ISAN, Sunny Nwosu, said that Nigerians grew the company to become an institution either through buying shares and trading same.
“The technical partners (now majority shareholders) do not trade their shares, they just leave them hanging. What they are trying to do is not the best way to thank us for what we have done. And if they try to show smartness, we will counter it. South Africa has been with them, they didn't bring money. It was the Nigerian shareholders that brought in money into the company to grow it,” Nwosu said.
ISAN members are not alone. They have the strong backing of the Chartered Institute of Stockbrokers, CIS, the professional body of the stockbrokers in the Nigerian capital market.
The President of CIS, Mike Itegboje, said that the supposed investment of N45 billion was only a ruse to drive Nigerians out of NBC.
“The company is to be re-registered as a private company in accordance with the relevant provisions of the Companies and Allied Matters Act and as a private company, its activities are no longer subject to public scrutiny. The Nigerian workers would also be worse for it in terms of the treatment they would get from the foreign dominated board of directors,” he said. Itegboje said that as stakeholders in the Nigerian economy and people who have monitored the growth of NBC over the years, the brokers owe it a duty to point out the negative implications of the intention of the soft drink bottling company.
“Having been nurtured to a very comfortable and rich position, the majority Greek owners of NBC are not only delisting, they are also dumping the Nigerian shareholders who have helped to sustain them over the years. They do not want any dilution,” Itegboje said. He noted that despite having Nigeria as its third largest market among the 28 countries where it operates, the majority shareholders are planning to deny Nigerian investors and other stakeholders of their benefits.
“As a strategic move, a company may delist in order to benefit its shareholders if its shares are trading below intrinsic value. The main purpose would be to reward the shareholders with substantial returns over the short term. In the case of NBC, the Nigerian shareholders are cleverly excluded leaving the Greek owners to effectively regain the full control and ownership of the company. That the Greek owners are bringing in more funds should not exclude Nigerians or send Nigerians out of the company in order to bring in more funds. Funds can be brought in form of convertible preference shares, convertible bonds or rights issue. They should let Nigerians decide that they do not want to invest by not taking up their rights before forcing them out of the company they have built over the years. Employment of funds will yield more income to CCHBC because Nigerians will consume the products. Is it right for the Nigerian consumers to be denied the opportunity to invest in the company?. SEC recently introduced a new code of corporate governance for directors of listed companies. Are the foreign shareholders afraid of the new code introduced by SEC?,” Itegboje said.
Notifying the delisting plan late last year, the board and management of the Nigerian Bottling Company, NBC said that the decision followed plans to invest about N45 billion in its operations over the next three years. According to NBC, the money will be invested on infrastructure modernisation, supply chain capacity enhancement, human capital development and expanded corporate social responsibility initiatives thus deepening Nigeria as a focal point. NBC explained that the financing and execution of this ambitious investment plan required reinvestment of all cash flows generated by the business in the foreseeable future, a restructuring of the share capital of the company and total commitment of management resources.
As a result of the investments, the Board of Directors decided that a Scheme of Arrangement be entered between the company and its members, involving a cancellation of part of its share capital, such that it would become a wholly owned subsidiary of its majority shareholder, Coca-Cola Hellenic Bottling Company, CCHBC, South Africa. For giving up their shares, the Nigerian minority shareholders would be paid N47 per share.
The Chairman of NBC, Chief Segun Apata, said, “NBC has a strong heritage in Nigeria and formed the foundation of CCHBC, the largest Coca-Cola bottling group in the world. Our investment plan will secure a leading role for NBC in the Coca-Cola system in Africa and globally.” Apata said. Speaking in the same vein, the Managing Director/Chief Executive of the company, Mr. Jim Lafferty, said that Nigeria would be the most important emerging economy in the world during the next decade.
“We are determined to unlock the significant potential of NBC and play a leading role in the transformation of the Nigerian economy,” he said, adding that the delisting would no way affect the company's employees or threaten their continued employment.
“We will continue to focus on growing our business in Nigeria. The three-year investment plan is facilitated by this change, and the investment plan reflects our commitment and confidence that we will succeed in our mission,” Lafferty declared
But given past experiences, market watchers said the delisting of NBC and others would be a big minus for the Exchange, saying that Onyema and his group should be more proactive and stop further exit of already listed companies if they want the market to be the gateway to the inflow of foreign investments into the frontier markets.
