There will be no more Coca Cola on the floors of the Nigerian Stock Exchange (NSE) for Stockbrokers and investors from September 7, 2011, Nigerian Bottling Company (NBC), bottlers of Coca Cola confirmed on Monday.
Shareholders have given up their right to continue to drink from future Coca Cola dividends on the floor of the Exchange to Greek based Coke bottler Coca-Cola Hellenic (CCH) in a deal said to be worth N21 billion ($136 million).Coca Cola had to put some sugar on the deal when shareholders had protested that the initial price at which it is asking them to give up their birthright on future Coca Cola dividends was too small. When Coca Cola put the proposal on the table in December 2010, it had offered N43 per share. Then Coca Cola’s price on the floors of the Exchange was N33 per share. So when Coca Cola called an Annual General Meeting (AGM) this month asking shareholders to ratify the deal, it was forced to sweeten the proposal further to get shareholders endorsement as some shareholders asked for N65 per share for them to deal.
The board Chairman of NBC Olusegun Apata, said the final price of N47.71 per share was arrived at after consultation with institutional investors and various shareholders groups.
“NBC did its best to raise the pay-off from N37 per share initially proposed at the time of the notice of delisting was filed with the management of the NSE to N47. 71 per share, and we feel that the premium is huge enough.”But minority shareholders and stockbrokers who have enjoyed Coca Cola on the Floors of the Exchange in the last 38 years are not happy with the deal. NBC is one of the oldest companies on the Exchange, having listed its shares on the floors of the NSE since 1973.
Adebayo Adeleke, Secretary General Independent Shareholder Association of Nigeria (ISAN) reacting to the company’s plan to delist on September 7 said “We are not happy with the decision. However as minority shareholders, we have had our say, but the majority shareholders have had their way.”
Coca-Cola Hellenic (CCH) already holds 66.4 percent of NBC. The buyout of minority shareholders will give them 100 percent control of the company. NBC stated in a delisting document submitted to the NSE that being a full subsidiary of CCH will result in cost savings and allow it to fully leverage the financial strength and resource of its parent company. NBC has already stated it plans to invest about N45 billion in its operations after the deal.
While shareholders are not happy with the deal, their crave t for Coca Cola dividends may have caused NBC to take Coca Cola off the floor of the Exchange. As analysts at BGL, stated in a December report on the NBC delisting proposal “The Nigerian market is characterized by a high investor expectation for generous dividend payouts and dividend bonuses even at the expense of retained earnings for future business expansion and on the other hand overlooking return on equity (ROE).”
The analysis shows that “The price of NBC experienced impressive growth from 2000 to 2005 when it increased by over 600 percent from N9.00 to N65.00. At these times, the company’s dividend hovered above N1.00 per share. However, investors’ showed their displeasure in 2006 when year‐on‐year prices fell by about 45 percent because dividends payments were halved”
“Delisting may have become necessary In view of the management’s long term strategy to inject new capital and conserve cash flows to fund expansions” Stated the BGL report.
Adeleke however gets emotional telling CCH not to forget that “The Coca Cola Franchise was built in Nigeria and by Nigerians. They should not forget that. Nigerians also buy the products of the company. Besides it is the minority shareholders that created whatever value the company has today. The majority shareholders never traded in their shares. We however wish them luck in their future plans.” He said.
Adeleke is right. There was Coca Cola in Nigeria even before there was Nigeria as an Independent nation. NBC has been operating in Nigeria since 1951 even before Nigeria got its independence from Britain in 1960.
From a small bottling plant which started production in 1953 in Ebute-Metta, Lagos, NBC has grown to become a major company with 13 bottling facilities and over 80 distribution warehouses located across the country and over 200,000 sales outlets in the country according to information on the company’s website.
NBC is currently the largest bottler of non-alcoholic beverages in the country in terms of sales volume, with about 1.8 billion bottles sold per year, making it the second largest market in Africa and manufactures and markets 33 different Coca Cola brands. It’s consistent dividend payment history in the 38 years on the floor of the Exchange has also endeared it to both shareholders and stockbrokers.
This is why Shareholders and Stockbrokers also worry about the signal that NBC delisting will send to other companies on the floors of the Exchange.
“We are afraid that other companies may follow their lead” Adeleke stated.
Analysts at BGL expressed similar sentiment stating in their December report that “NBC represents a global brand and thus the delisting from the NSE may not be too good for the branding of the Nigerian capital market especially at a time when there is a strong push to diversify and deepen the market.”
The regulatory authorities have come under criticism from both shareholders and stockbrokers for not being able to discourage NBC from delisting.
Boniface Okezie, Coordinator, Progressive Shareholder Association, believes the successful delisting of NBC is an indication that the regulatory bodies in the capital market were “weak, because they could not persuade NBC not to delist from the Exchange.”
Faroog Oreagba, a director at Karaho Capital Partners expressing disappointment with the planned delisting of NBC noted that “Companies will continue to delist until the Nigerian Stock Exchange (NSE) and the Securities and Exchange Commission (SEC) develop a value proposition that will encourage firms to list and remain listed.”
Giving an insight on what may have forced NBC to delist from the Exchange, Farooq noted that “There has been no equity capital raising from the capital market in two years. Why would they want to pay listing fees every year? I know that the NSE and SEC are busy working on addressing these issues but it appears that they need to work faster, especially as other exchanges and platforms are trying to take their market.”
Tunde Oyekunle, Managing Director of GTI Capital also asked the NSE and SEC to sit up if they do not want more companies to delist from the floor of the Exchange. He asks that “The NSE and SEC should ask itself why NBC is delisting? What value have they added to NBC since its listing? It is not about just being listed and giving them rules to abide by.”
A call and text message sent to Taba Peterside, NSE’s head of listing was not responded to as at press time.
The NBC delisting is not coming at a good time for the NSE and SEC which are actually working hard to attract more viable companies to list on the floor of the Exchange. Already the SEC has begun a series of road shows across the country in a bid to talk to company management to list their firms. With one of the flagship companies of the NSE delisting, the quest by SEC and NSE to achieve more corporate listing may have been dealt damaging blow.
Just as BusinessDay was going to press, United Nigeria Textile Mills (UNTL) Plc filed its intention to delist from the NSE. The company says it is delisting because of the need to do a corporate and financial restructuring.
UNTL has been listed on the NSE even longer than Coca Cola. The company listed in 1971, and December would make it 40 years since its listing. Its intention to delist may confirm the fear by shareholders that more companies may follow NBC’s lead.
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