Nigerian Breweries targets 70 per cent market share after merging with Consolidated Breweries

The directors of Nigerian Breweries Plc and Consolidated Breweries Plc have agreed to merge the two companies into one. The agreement is expected to help realize the objective of actualizing their common aspiration of establishing an unassailable market leadership position to continually create value for their shareholders.
The Chairman, Nigerian Breweries, Kolawole Jamodu, said in his consent letter to shareholders that the proposed merger would create a platform for significant synergies between both companies, particularly in terms of cost and revenue and ability to create additional value for the benefit of shareholders, employees, customers, distributors, suppliers and the economy as a whole.
For Chairman, Consolidated Breweries, Oyinade Odutola-Olurin, the decision was primarily to help reposition the company to compete in a market requiring new strategies and new market penetration.
The merger proposal  and the terms, which the directors of both companies consider fair, reasonable and in the best interest of their companies, are expected to be presented to their respective shareholders in separate court-ordered meetings scheduled for December 4, 2014.
The merger would be following a similar move recently by Nigerian Breweries to acquire Sona Systems Associates Business Management Limited and Life Breweries Company Limited from Heineken International B.V.
The proposal would require the approval of 75 per cent of the shareholders of each of the companies, with the surviving entity at the end of the exercise being Nigerian Breweries. If approved, the merger is expected to be completed in January 2015.
Apart from creating the opportunity for the two brewing firms to align long-term strategic interests, their directors say the merger would yield four major benefits to stakeholders.
These include broader product offering, as the enlarged company would have an enriched product portfolio covering all market segments (premium, mainstream and value segments) to the benefit of their customers.
After the merger, the directors say Nigerian Breweries market share is expected to jump 61 per cent to over 70 per cent, as a result of enhanced capacity to manufacture products of both entities, to be sold and distributed across the combined sales and distribution networks of the two companies.
Besides, the operational efficiency that would come with the merger would also be beneficial by streamlining operations, optimizing use of resources and eliminating duplications.
The directors expect significant cost savings from optimisation of combined resources to the benefit of all stakeholders. By distributing the enlarged product portfolio through the combined network of the two companies, considerable cost savings are expected from selling/distribution expenses. Additional cost savings are also expected from increased efficiency in procurement, supply chain management and other support functions.
Again, shareholder value creation would be another major benefit, as the improved operating efficiency and cost savings anticipated would lead to a reduction in the overall cost-income ratio. This would result in improved profit margin and consequently increase in value to shareholders. The directors believe the synergies that would be created from the merger would enhance growth in shareholder value.
Improved liquidity for shareholders is another benefit being targeted by the mergerThe scheme of merger has a provision for the issuance of 396,857,294 ordinary shares of 50 kobo each by Nigerian Breweries in exchange for the existing 496,071,617 ordinary shares of Consolidated Breweries at a ratio of four new shares for every five held, or a cash consideration of N120 per share of Consolidated Breweries held.
This means a high degree of liquidity for shareholders of Consolidated Breweries, which, at the moment, is not listed on the Nigerian Stock Exchange. The effect would be that shareholders of Consolidated Breweries would acquire equities that are tradable on the stock exchange. In the post merger environment, Nigerian Breweries would increase its volume of shares to approximately 7,960 million, which would increase market capitalization.
Incorporated in 1946 as a public limited liability company, the Nigerian Breweries, which is engaged in the brewing, marketing and selling of both alcoholic and non-alcoholic beverage drinks in Nigeria, commands the leading market share in the brewing industry and has maintained a stable and sustainable growth.
Today, the company, which produces some of the major brands, including Heineken lager, Gulder lager, Star lager, Maltina malt drink, Amstel Malta malt drink, Fayrouz soft drink, and Climax herbal energy drink, is the second largest companies listed on the Nigerian Stock Exchange (NSE).
Nigerian Breweries financial accounts for the year ended December 31, 2013 puts its authorized and paid up share capital at N4 billion and N3.78 billion respectively, while total assets during the same period were in excess of N252billion, with market capitalization of about N1.13 trillion as at May 8, 2014 and over 115,000 shareholders across the country.
It has also grown turnover consistently from N164.21 billion in 2009 to a peak of N268.61 billion in 2013. It is expected to maintain the continuing growth trend in sales revenue in 2014.
Profit performance has largely followed the stable growth in revenue. Apart from a slowdown in 2012, the company has improved profit every year in the past five years from N27.9 billion in 2009 to a height of N43.08 billion at the end of 2013. It maintains a leading net profit margin in the breweries sector at 16 per cent in 2013, showing a long record of regular dividend payment to shareholders.
The company also recorded a net asset growth figure of N46.57 billion in 2009 to N112.36 billion in 2013, with total asset value increasing from N106.99 billion in 2009 to N252.76 billion in 2013.
On the other hand, Consolidated Breweries, which emerged from the merger of Continental Breweries Limited and Eastern Breweries Limited in 1982, has also achieved a continuing growth in sales revenue in the past five years, with sales revenue improving every year from N20.21 billion in 2009 to N33.91 billion at the end of 2013.
The company is involved in the production, marketing and distribution of alcoholic and non-alcoholic beverages, including ’33’ Export Lager Beer, Turbo King Dark Ale, Williams Dark Ale, Hi-Malt and Maltex Malt.
After tax profit of the company has maintained profitable operations since 2009, increasing from N2.79 billion in 2009 to a peak of N3.22 billion in 2012, before dropping to N1.12 billion in 2013 due to rapid increases in finance cost and cost of sales. The company has maintained an unbroken record of dividend payment to shareholders.
Though the dividend payments have been on a declining trend from N3.52 billion in 2009 to N1.85 billion in 2013, the company has maintained the consistency of giving some returns to its investors.
The assets value of the company remains strong, with net asset growing from N5.27 billion in 2009  to about N44.32 billion.
Five-year Financial Records of Nigerian Breweries Nb
2013
2012
2011
2010
2009
Turnover
268.61
252.67
230.12
185.86
164.21
After Tax Profit
43,080
30.04
38.02
30.33
27.91
EPS – N
5.70
5.03
5.03
4.01
3.69
Dividend per Share – N
3.0
3.0
1.25
2.40
3.69
Net Assets
112.36
93.45
78.30
50.17
46.57
Total Assets
252.76
253.63
216.37
114.39
106.99
Five-year Financial Records of Consolidated Breweries Nb
2013
2012
2011
2010
2009
Turnover
33.91
33.53
27.91
24.46
20.21
After Tax Profit
1.12
3.22
2.86
3.17
2.79
EPS – N
2.30
6.84
5.96
7.99
7.05
Dividend per Share – N
1.85
1.37
3.25
4.0
3.52
Net Assets
13.94
14.93
6.56
7.04
5.27
Total Assets
44.32
39.79
24.67
13.97
12.42

DOWNLOAD THE PREMIUM TIMES MOBILE APP

Now available on

  Premium Times Android mobile applicationPremium Times iOS mobile applicationPremium Times blackberry mobile applicationPremium Times windows mobile application

TEXT AD: To place a text-based advert here. Call Willie - +2347088095401


All rights reserved. This material and any other material on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from PREMIUM TIMES.