Diageo PLC said it has approached the board of Guinness Nigeria PLC with a roughly $208 million offer to increase its stake in the listed Nigerian company that houses Diageo’s beer brands in the country.
Diageo has offered to increase its stake in Nigerian Stock Exchange- listed Guinness Nigeria—which houses brands like Guinness, Harp and Malt—to 70% from 54.3% as the world’s largest spirits company looks to wield more control over its African business.
London-headquartered Diageo, which makes Smirnoff vodka and Johnnie Walker whisky, said it has proposed launching a tender offer to buy shares in Guinness Nigeria from shareholders for a per-share price of 175 Nigerian naira (roughly 88 cents) in cash, or a 40% premium to the company’s closing price on Tuesday.
The company said it could also look to acquire shares in the market for 175 naira per share or below if a deal is approved. The proposed deal would be subject to regulatory approval by the Nigerian Stock Exchange and the Nigerian Securities and Exchange Commission.
The move comes after Diageo in July said it would terminate its partnership with Heineken NV in South Africa, saying it had the necessary scale to grow on its own in the country.
Africa has emerged as a rare bright spot for Diageo, which in July reported a 0.8% drop in operating profit for the fiscal year ended June 30 amid weaker sales in North America, the Asia-Pacific region, Latin America and the Caribbean. In Africa, discounting the effect of acquisitions and currency fluctuations, sales rose 6%.
Liquor-focused Diageo has faced years of speculation as to whether it will eventually sell Guinness, but the company publicly insists that having a beer business in Africa is an essential part of its plan to drive growth in its less developed spirits business on the continent.
Nigeria and East Africa, including beer and spirits, made up between 3% to 6% of Diageo’s net sales last fiscal year. On Thursday, Guinness Nigeria reported a 9% rise in net sales for the year ended June 30.
WSJ
POSITIVE NIGERIA 