Economy
Nestle Pays $7.15b to Market Starbucks Products
By Modupe Gbadeyanka
A licensing deal worth $7.15 billion has been sealed between Nestle and Starbucks Corporation, allowing Nestle have the perpetual right to market Starbucks’ consumer and foodservice products globally outside of Starbucks coffee shops, which are not part of the transaction.
“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” said Mr Mark Schneider, CEO, Nestlé.
“With Starbucks, Nescafé and Nespresso we bring together three iconic brands in the world of coffee.
“We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world,” he added.
“This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé,” President and CEO of Starbucks, Mr Kevin Johnson, stated.
“This historic deal is part of our ongoing efforts to focus and evolve our business to meet the changing consumer needs, and we are proud to work alongside a company that is committed to our shared values,” he added.
Business Post reports that the two companies will work closely together on innovation and go-to-market strategies to bring the best coffee to customers around the world as the deal allows Nestlé to capture exciting new growth opportunities in the rest of the world with Starbucks premium products. As a complete provider of coffee solutions, Nestlé will accelerate growth in out-of-home channels.
However, the agreement is subject to customary regulatory approval and is expected to close by the end of 2018. The agreement excludes Ready-to-Drink products and all sales of any products within Starbucks coffee shops.
As part of this transaction, Starbucks will receive an up-front cash payment of $7.15 billion for a business which generated annual sales of $2 billion.
But the transaction does not include the transfer of any fixed assets, which facilitates a smooth and efficient integration and Nestlé expects this business to contribute positively to its earnings per share and organic growth targets as from 2019.
Nestlé’s ongoing share-buyback program will remain unchanged, the management said, but approximately 500 Starbucks employees will join the Nestlé family to drive performance of the existing business and global expansion. Operations will continue to be located in Seattle.
Meanwhile, notable credit rating company, Moody’s, has rated the Nestlé’s Starbucks deal as “credit negative,” changing its outlook on Nestlé’s Aa2 rating to negative from stable.
It noted that the deal will be fully funded with debt, increasing Nestlè’s reported gross debt by approximately 20 percent.
Moody’s said because Nestle confirmed that its ongoing CHF20 billion share buyback to be completed by 2020 will not be amended following the transaction, the firm’s credit metrics, which are already weak for its current Aa2 rating, will deteriorate.
“We expect Nestlé’s ratio of retained cash flow to net debt to drop to below 20% in 2019 and 2020 from 29 percent in 2017, which is below our 30 percent quantitative guidance for its Aa2 rating, and its ratio of funds from operations to net debt to decline to 36 percent -40 percent from around 56 percent,” Moody’s said in its report obtained by Business Post.
However, Moody’s said in spite of the negative credit implications, the agreement is positive from an industrial standpoint because it will reinforce Nestlé’s position in the coffee segment, which is growing faster and with higher profitability than the group’s average.
In 2017, Nestlé’s powdered and liquid beverage division, which includes coffee, grew by 3.6 percent compared with the group’s consolidated organic sales growth of 2.4 percent and the division’s underlying trading operating margin was 21.9 percent compared with a consolidated 16.4 percent.
The Starbucks’ business included in the agreement generated approximately $2.0 billion of revenue in 2017 and Nestlé could rapidly expand it, especially outside the US given its global distribution platform.
Moreover, the deal does not entail any fixed-asset transfer, which should limit execution risk and reduce integration costs.
The agreement is consistent with Nestlè’s strategy to reach mid-single-digit organic sales growth in 2020 and improve its underlying operating margin to 17.5 percent -18.5 percent by 2020 from 16 percent in 2016, reflecting accelerating organic sales growth via product innovation and renovation; a CHF2.0-CHF2.5 billion cost-savings programme; and the adjustment of the group’s product portfolio by disposing of low-growth, low margin segments and by investing in more attractive ones. Recent transactions include the disposal of the US confectionery business for $2.8 billion in January 2018, the acquisition of Canadian nutritional company Atrium for $2.3 billion in December 2017 and the purchase of a 68 percent stake in premium coffee retailer Blue Bottle Coffee in September 2017. The company is also considering the disposal of Gerber’s life insurance business.
By Adedapo Adesanya
Seplat Energy Plc will revive hundreds of Nigerian oil wells laying fallow after completing the acquisition of Mobil Producing Nigeria Unlimited (MPNU) from ExxonMobil.
The company said it aims to lift oil output to about 200,000 barrels a day, a move that will help boost Nigeria’s oil production levels, as it aims to reach 2 million barrels per day next year.
The transaction, according to Seplat, “is transformative for Seplat Energy, more than doubling production and positioning the company to drive growth and profitability, whilst contributing significantly to Nigeria’s future prosperity.”
The completion of the Seplat-ExxonMobil deal has created Nigeria’s leading independent energy company, with the enlarged company having equity in 11 blocks (onshore and shallow water Nigeria); 48 producing oil and gas fields; 5 gas processing facilities; and 3 export terminals.
Recall that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October approved the deal as part of a series of approvals, while it blocked Shell’s asset sale of up to $2.4 billion to the Renaissance consortium.
The acquisition of the entire issued share capital of MPNU adds the following assets to the Seplat Group: 40 per cent operated interest in OML 67, 68, 70 and 104; 40 per cent operated interest in the Qua Iboe export terminal and the Yoho FSO; 51 per cent operated interest in the Bonny River Terminal (‘BRT’) NGL recovery plant; 9.6 per cent participating interest in the Aneman-Kpono field; and approximately 1,000 staff and 500 contractors will transition to the Seplat Group.
MPNU adds substantial reserves and production to Seplat Energy; 409 million barrels of oil equivalent (MMboe) 2P reserves and 670 MMboe 2P + 2C reserves and resources as at 30 June 2024 and 6M 2024 average daily production of 71.4 kboepd (thousand barrels of oil equivalent).
Business Post reports that Seplat will be part of the payment this year, and will defer some to next year,
Speaking on the transaction, the Chairman of Seplat Energy, Mr Udoma Udo Udoma commended President Bola Tinubu for supporting this transaction and appreciated the support and diligence of the various ministries and regulators for all the work to reach a successful conclusion.
“We are delighted to welcome the MPNU employees to Seplat Energy. We are excited to begin our journey in a new region of the country, and we look forward to replicating the positive impacts we have achieved within our communities in our current areas of operations.
“Seplat’s mission is to deliver value to all our stakeholders, and we treasure the good relationships we have developed with the government, regulators, communities and our staff.”
On his part, the chief executive of Seplat Energy, Mr Roger Brown, described the acquisition as a major milestone, adding, “I extend my thanks to the entire Seplat team for their hard work and perseverance to complete this transaction.
“MPNU’s employees and contractors have a strong reputation for safety and operational excellence, and I welcome them to the Seplat Energy Group.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world-class basin, providing enormous potential for the Seplat Group. Our commitment is to invest to increase oil and gas production while reducing costs and emissions, maximising value for all our stakeholders.
“MPNU is a perfect fit with our strategy to build a sustainable business that can deliver affordable, accessible and reliable energy for Nigeria alongside attractive returns to our shareholders”.
By Adedapo Adesanya
The National Pension Commission (PenCom) is projected to close the year with over N22 trillion in pension assets impacted by challenges like inflation and monetary policies.
This is according to PenCom Director-General, Mrs Omolola Oloworaran, at a press conference in Abuja on Thursday.
She said as of October 2024, the Contributory Pension Scheme (CPS) had 10.53 million registered contributors and pension fund assets worth N21.92 trillion.
Speaking at the conference-themed Tech-driven Transformation Shaping the Pension Landscape, which showcased PenCom’s strategic commitment to innovation, she said that the numbers reflected the agency’s unwavering commitment to fund safety, prudent management, and sustainable growth.
She explained that the pension environment was impacted by the wider economic challenges facing the country, noting that the sector battled multi-year high inflation, Naira devaluation, and the lingering effects of unorthodox monetary policies by the Central Bank of Nigeria (CBN).
Business Post reports that the apex bank hiked interest rates by 875 basis points this year alone to tackle persistent inflation which peaked at 33.8 per cent as of October.
She said that these challenges eroded the real value of pension funds and impacted contributors’ purchasing power.
“To address these issues, the commission has initiated a comprehensive review of its investment regulations.
“It is focusing on diversifying pension fund investments into inflation-protected instruments, alternative assets, and foreign currency-denominated investments.
“The goal is to safeguard contributor savings and ensure resilience against future economic volatility,” she said.
She restated the commission’s commitment to expanding pension coverage, particularly through the advanced micro-pension plan designed to encourage participation from the informal sector using technology.
“This initiative will make it easier for everyday Nigerians to save for retirement, aligning with our vision of inclusive growth and financial stability for all.
“The backlog in retirement benefits for retirees of the Federal Government’s Ministries, Departments, and Agencies (MDAs) will soon be settled.
“The federal government recently disbursed N44 billion under the 2024 budget to settle approved pension rights.
“We are collaborating with the Federal Government to institutionalise a sustainable solution to ensure retirees receive their benefits promptly, eliminating delays,” Mrs Oloworaran said.
She said that PenCom’s technology-driven transformation aimed to make the CPS more accessible, reliable, and sustainable.
“From data management to seamless contributions and regulatory supervision, we are paving the way for a future where the pension industry serves all Nigerians effectively,” she said,
Mrs Oloworaran also said that the e-application portal for pension clearance certificates has replaced the manual processes and enhanced the ease of doing business in the sector.
“Since its deployment, 38,528 pension clearance certificates have been issued. This initiative ensures compliance and secures the future of Nigerians working in organisations that interact with the government,” she said.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange closed flat on Thursday, December 12 after it ended the trading session with no single price gainer or loser.
As a result, the market capitalisation remained unchanged at N1.055 trillion as the NASD Unlisted Security Index (NSI) followed the same route, remaining at 3,012.50 points like the previous trading session.
However, the activity chart witnessed changes as the volume of securities traded at the bourse went down by 92.5 per cent to 447,905 units from the 5.9 million units transacted a day earlier.
In the same vein, the value of securities bought and sold by investors declined by 86.6 per cent to N3.02 million from the N22.5 million recorded in the preceding trading day.
But the number of deals carried out during the session remained unchanged at 21 deals, according to data obtained by Business Post.
When trading activities ended for the day, Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units sold for N3.9 billion, Okitipupa Plc came next with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc was in third place with 297.5 million units worth N5.3 million.
Also, Aradel Holdings Plc remained the most active stock by value (year-to-date) with 108.7 million units worth N89.2 billion, followed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.5 million units sold for N5.3 billion.
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