Excelsior request to buy out Flour Mills’ minority shareholders, fuelling delisting rumours

Flour Mills of Nigeria has announced that its majority shareholder, Excelsior Shipping Company Limited, has offered to acquire all shares held by minority shareholders, a move that could result in the company’s delisting from the Nigerian Exchange (NGX). 

The company made this disclosure on the NGX platform on September 24, 2024, just days after its stock price surged by 22% month-to-date in the third week of trading. 

According to the announcement, the acquisition proposal has already received a “no objection” ruling from the Securities and Exchange Commission (SEC), positioning the company for an imminent exit from the Nigerian stock market. 

What to Know 

• Excelsior Shipping Company Limited, which currently owns 62.95% of Flour Mills’ shares, aims to acquire the remaining shares to complete its takeover.  
• This transaction would result in the delisting of Flour Mills from the NGX, as both the NGX and the Central Securities Clearing System (CSCS) will be notified, and trading in the company’s shares will be terminated once the eligibility date is confirmed. 
• The acquisition plan has been approved by the SEC and will be executed through a scheme of arrangement between the company and its shareholders.  
• Flour Mills has obtained a court order to hold a shareholder meeting on November 14, 2024, to seek approval for the scheme. Notably, Excelsior Shipping Company Limited will not vote at this meeting. 

The Scheme of Arrangement 

The proposed divestment is outlined under Section 715 of the Companies and Allied Matters Act (CAMA) 2020. Under the scheme, any outstanding shares not currently held by Excelsior Shipping Company Limited will be transferred to the majority shareholder. 

• A notice accompanying the court order explains, “The legal and beneficial ownership of the scheme shares (as defined in the scheme document) shall be transferred to Excelsior Shipping Company Limited and its wholly owned Nigerian subsidiary, Greywise Investment Solutions Limited, without further act or deed.” 
• “In exchange, shareholders will receive N70 per share as consideration for the transfer.” 

To streamline the process, Flour Mills has announced that its register of members will be closed from September 25 to September 27, 2024.

• During this period, the company will assess and finalize the list of shareholders who will be eligible to receive the scheme document. 
• This step is essential in preparation for the upcoming court-ordered meeting, where shareholders will review and vote on the proposed scheme of arrangement.
• The acquisition marks a significant shift for Flour Mills of Nigeria, signaling its departure from the exchange and the consolidation of control by its majority shareholder, Excelsior Shipping Company Limited. 

Potential Delisting?

The move to buy out minority shareholders of the company adds fuel to recent rumours of a potential delisting, which have been circulating for weeks.

• While Nairametrics cannot confirm if this will lead to a delisting, our findings suggest the company may be considering a transition to a holding company (HoldCo) structure.
• However, buyouts of this nature often signal a path towards delisting.
• In recent weeks, speculation among traders suggested that Flour Mills, one of Nigeria’s largest consumer goods companies, might be preparing to delist from the Nigerian Exchange.

The release of new information, however, points to a more strategic move rather than a straightforward delisting.

Buyout and Future Implications

The Scheme of Arrangement proposed by Excelsior is a strategic move that would result in the consolidation of ownership under the majority shareholder.

• Although this does not confirm an immediate delisting, buyouts of this nature frequently lead to such outcomes, especially when the company is looking to streamline its structure or reposition itself.
• Additionally, sources close to the company suggest that Flour Mills may be exploring a transition into a HoldCo structure.
• This would involve separating its various subsidiaries, such as its food and agro-allied divisions, into independent entities that could potentially be listed separately on the stock exchange.
• This model would be similar to the approach taken by Dangote Industries, allowing each business unit to operate independently under the parent company.

Recent Stock Movements

Despite the uncertainty, Flour Mills has seen its share price rise by 22% month-to-date as of mid-September.

• This increase comes amid a broader negative sentiment toward Fast-Moving Consumer Goods (FMCG) stocks, which have been affected by the naira’s devaluation and foreign exchange losses.
• However, Flour Mills has remained resilient, buoyed by its recent financial performance.
• For the period ending June 30, 2024, the company reported a pre-tax profit of N7.36 billion, a significant turnaround from the N9.33 billion pre-tax loss recorded in the same period last year.
• While the stock remained largely unchanged in August, the September surge may be attributed to investor speculation surrounding the potential buyout and restructuring.

What’s Next?

While it remains unclear if Flour Mills will eventually delist, the acquisition of minority shares and the potential shift to a HoldCo structure suggest that significant changes are underway.

• Shareholders are expected to vote on the proposed Scheme of Arrangement at a Court-Ordered Meeting scheduled for November 14, 2024.
• The outcome of this meeting, along with any further corporate restructuring, will provide a clearer picture of the company’s direction moving forward.