The N165billion Rights issue by International Breweries Plc, a subsidiary of ABInBev, closes today.
The company opened the offer for 18,266,206,614 units of ordinary shares of 50 kobo each at N9.00 per share on Thursday, December 5, 2019, and was expected to close Tuesday, December 24, 2019.
Under the plan, for every 8 shares held by shareholders whose names appeared in the register of members of the company as at November 6, 2019, an offer of 17 ordinary shares was made.
The offer, which has been well received and subscribed to.
Through the Rights issue, the company’s capital structure is expected to be remarkably changed as long-term debt is replaced with equity, thereby easing the burden of interest payments, increasing management’s flexibility as well as removing volatility in earnings.
This offer, which interestingly is currently the largest Rights issue in Nigeria, is to have its full impact reflected in 2020 while presenting a positive outlook for dividends for shareholders in 2021.
With a fair post rights issue valuation range of between N471 billion and N504 billion, International Breweries, by this rights issue, is most likely to become the seventh most capitalised company on the Nigerian Stock Exchange (NSE).
A statement by the company noted that through International Breweries Plc, its parent company, ABInBev, by this offer certainly has a long-term outlook for Nigeria. AB InBev had invested in capacity expansion including about N90 billion or $250 million in its Sagamu plant while it will be injecting N124 billion or $341 million through the rights issue.
Unarguably the number two brewer in Nigeria, International Breweries Plc, in spite of the difficult competitive environment that features weak macroeconomics, tough excise tax regime and fierce price war, now controls about 25 per cent of the Nigerian beer market through its hold of market share on the back of its two core brands.
According to the statement, with the new capacity on stream and ramped up investments, the company is expected to consolidate on its leadership and continue to take share of market.
Anheuser-Busch InBev (AB InBev), the majority core investor in International Breweries, holds the majority equity stake of 75.1 per cent in International Breweries Plc. With the pre-allotment ratio, about 13.72 billion ordinary shares of 50 kobo each have been pre-allotted to AB Inbev.
The N164.39 billion recapitalisation exercise is one of the largest indirect capital injections in the Nigerian capital market. It came on the heels of the consolidation of AB InBev’s Nigerian operations under a single corporate entity.
In 2017, AB InBev had merged its three indirect Nigerian subsidiaries – International Breweries Plc, Intafact Beverages Limited and Pabod Breweries Limited – through a scheme of merger with International Breweries subsisting as the post-merger company.
The exercise was a major strategic move by Anheuser-Busch InBev to upend competition and consolidate its Nigerian base for further expansion into the Sub-Saharan Africa (SSA).
With the 2017 business combination, AB InBev’s majority equity stake in International Breweries increased to 75.1 per cent. A total of 5.302 billion ordinary shares were issued for the merger. With the supplementary listing of 5.302 billion ordinary shares, the total issued and fully paid up shares of International Breweries had increased from 3.294 billion to 8.596 billion ordinary shares.
The merger was believed to be a major competitive move by AB InBev to give its operations a major nationwide push to increase its market share. International Breweries is located in Ilesa, Osun State, South West Nigeria. Intafact Beverages’ is situated in Onitsha, Anambra State in the South-East region while Pabod Breweries is located in Oginigba, Port Harcourt, Rivers Sate in the South-South region.
Prior to the merger, AB InBev held 72.17 per cent majority equity stake in International Breweries through its subsidiary-Brauhaase International Management GMBH. SABMiller Nigeria Holdings BV-another subsidiary of AB InBev had held 75 per cent and 82.81 per cent majority equity stakes in Intafact and Pabod respectively. Ministry of Finance of Anambra State had held 10 per cent equity stake in Intafact while Ministry of Finance Incorporated of Rivers State held 14.52 per cent equity stake in Pabod.
After the merger of the three companies-SABMiller Nigeria Holdings BV and Brauhaase International Management GMBH hold 47.4 per cent and 27.7 per cent equity stake respectively in International Breweries, giving the foreign majority core investor controlling equity stake of 75.1 per cent. Ministry of Finance of Anambra State holds 4.7 per cent equity stake while other minority shareholders hold the remaining 20.2 per cent equity stake.