By Dipo Olowookere
Application for the N15.4 billion rights issue of Nigeria’s largest and oldest business conglomerate, UAC of Nigeria (UACN) Plc, has closed.
The exercise was wrapped up on Friday, December 22, 2017 after it had opened on Wednesday, November 15, 2017.
UACN floated the rights issue to raise N15.36 billion by offering 960.43 million ordinary shares of 50 kobo each at N16 per share to pre-qualified shareholders. The new shares were pre-allotted to shareholders on the basis of one new share for every two shares held as at the close of business on October 19.
After deduction of the estimated issue costs and expenses of N333.91 million, representing 2.2 percent of the gross issue proceeds, the net issue proceeds is about N15.033 billion.
A breakdown of the utilisation of the net proceeds indicated that the largest chunk of the net proceeds of N15.03 billion will be invested in the Plateau State-based subsidiary-Grand Cereals.
The board noted that due to increasing cost of raw materials and the planned investment by Grand Cereals into the agricultural value chain, it has identified the need for equity injection into the subsidiary.
The planned N7 billion rights issue of Grand Cereals will be subscribed to by UACN to the extent of its 64.9 per cent holding in addition to any unsubscribed units. The total amount of proceeds to be used for this investment is N5 billion.
Also, to further support Grand Cereals’ expansion plans into the agricultural value chain, the board has identified the need for a shareholder loan of N3.5 billion to the subsidiary. However, the planned shareholder loan will be provided on commercial terms to Grand Cereals and upon repayment at a future date will be deployed in the food and agro-processing categories of the Group to enhance shareholder value.
About N4.8 billion will be spent on supporting the working capital of both the Grand Cereals Limited and Livestock Feeds Plc by part-financing inventory procurement during harvest season of grains and oil seeds. About N2.8 billion will be used for Grand Cereals while N1.2 billion will be devoted to Livestock Feeds.
According to the conglomerate, the harvest season of grains and oil seeds usually starts in the last quarter of every year when the financial institutions typically adopt tight credit policies to achieve their audited balance sheet goals.
The availability of the required funds in a timely manner at that particular time is a competitive imperative. The raw materials will be utilised in the course of the year by the two subsidiaries. Also, the transaction between UACN and the agro-processing subsidiaries will be on commercial terms and at arm’s length.
The conglomerate has also indicated that it would consider new acquisitions and mergers to further optimise the values of its existing businesses and take advantage of emerging opportunities in other sectors.
In a circular outlining the operational philosophy of the conglomerate and the purposes of the ongoing new capital raising, the board of directors of the conglomerate stated that it would “continue to explore merger and acquisition opportunities relevant to it businesses”.
The board of the conglomerate indicated it has earmarked N2.5 billion from the net proceeds of the ongoing rights issue for “product innovation and growth investment in existing markets and adjacent categories”.
