Since the last market meltdown in 2008, quoted companies had been reluctant to approach the capital market for funds that can aid their business growth, due to apathy on the part of shareholders that were affected negatively during and after the last global financial crisis.
For Unilever Nigeria Plc, the ongoing N58 billion right issue have started to rekindle investors’ confidence in the market and the company. In the capital market right issue afford companies the opportunity to seek for fresh capital from existing shareholders to support their operations in expectation for good returns on investments.
With the ongoing right issue which will end on September 8, 2017, shareholders that are able to pick their right offer are already, enjoying a discount above 30 percent, when compared with the offer price of N30.00 kobo and the current price of N41.30 kobo which the company share price closed on Friday last week.
However, the current appreciation is separate from the 22 percent discount to market price as at opening date of July 31, 2017, the price appreciation according to market operators is source of hope for shareholders in the short term. Even though, research analysts in the market have valued the company stock at N39.88 kobo, after the right issue exercise.
Details of the right issue offer, which commenced on July 31, 2017, according to Unilever Nigerian Managing Director Yaw Nsarkoh, shows that the net proceeds will help the company repay outstanding foreign currency denominated liabilities, purchase additional raw materials required for its products and to meet other working capital requirement in order to build long term value for all stakeholders.
Yaw Nsarkoh, while addressing capital market community at its facts behind the figures on the floor of Nigerian Stock Exchange (NSE) explained that “Through this rights issue, we will be able to reinforce our financial flexibility to support our growth initiative, while giving shareholders an opportunity to consolidate their shareholding position. The Rights Issue is part of Unilever Nigeria’s long term strategic intent to strengthen the company’s capital base by deleveraging its balance sheet, support its working capital needs and position the company to exploit value accretive opportunities”.
A breakdown of how the right issue proceeds will be deployed shows that N38.502 billion will go into the payment of foreign exchange denominated obligations. The amount set aside for the purchase of raw materials stood at N11.813 billion, while N7.365 billion is for working capital. Already the parent body of Unilever Nigeria has assured that they will take up their right issue.
The provisional allotment shows that shareholders are expected to get 14 new Ordinary Shares for every 27 Ordinary Shares of 50 kobo each held as at the close of business on 28 June 2017. According to the right issue time table the listing of new Unilever Nigeria shares / trading will commence on November 1, 2017.
A look at the company’s second quarter result for the period ended June 30, 2017 shows that revenue grew by 40 percent while profit after tax grew by 236 percent, boosted by strong revenue performance and effective cost management initiatives.
Unilever Nigeria Plc which enjoys a global heritage as a member of the Unilever Group, one of the world’s leading consumer goods companies whose food, home and personal care brands are used by families globally each day, was established on April 11, 1923 as a soap manufacturing company, West Africa Soap Company, which later became known as Lever Brothers Nigeria Limited.
The Company was subsequently listed on the floor of Nigerian Stock Exchange in 1973 as Lever Brothers Nigeria PLC. Over the years, the Company diversified into manufacturing and marketing of food and personal care products via a series of mergers and acquisitions including Lipton Nigeria Limited in 1985, Cheesebrough Industries Limited in 1988 and Unilever Nigeria Limited in 1996. The resultant entity was renamed Unilever Nigeria Plc in 2001 in line with the strategic direction of the company business.