Nigeria: Foreign investors pump more than N800 billion in Nigerian breweries

World’s leading breweries are investing more than N800 billion in the Nigerian breweries sub-sector in major boosts to the country’s quest for foreign direct investments (FDIs), The Nation Newspaper reported on August 29.

Regulatory documents obtained on August 28 showed that foreign majority investors are injecting some N800 billion in Nigeria’s two largest brewers - Nigerian Breweries (NB) Plc and International Breweries (IB) Plc - the largest recapitalisations in recent period.

The documents indicated that Netherland-based Heineken N.V. has secured approval to invest not less than N341 billion in NB through a rights issue that pre-allocate about 12.9 billion ordinary shares to the multinational.

Heineken N.V., which has shown strong appetite for the Nigerian market, could scale up investments to more than N400 billion, according to sources in the know.

Anheuser-Busch InBev (AB InBev), a world’s leading brewer, has successfully concluded a major recapitalisation of IB, with injection of more than N400 billion in the Ilesa, Osun State-based brewer.

NB is undertaking its biggest recapitalisation ever with a N599.1 billion rights issue, where Heineken N.V. has firmly committed to providing at least N341 billion. NB is offering 22.61 billion ordinary shares of 50 kobo each at N26.50 per share. The shares have been pre-allotted on the basis of 11 new ordinary shares for every five ordinary shares held as at the close of business on Friday, July 12, 2024. The offer is expected to open over the next week.

IB, which had launched a N588.3 billion recapitalisation, indicated it successfully raised N516.22 billion. Multiple sources in the know said AB InBev provided more than N440 billion of the total fund raised.

IB had floated a rights issue of 161.17 billion ordinary shares of 2.0 kobo each to existing shareholders at N3.65 per share. The rights issue was pre-allotted on the basis of six new ordinary shares for every one existing ordinary share held as at the close of business on Thursday, May 02, 2024.

Nigerian Exchange (NGX)’s records showed that 141.43 billion ordinary shares of 2.0 kobo were picked up, representing 87.75 per cent subscription level. Sources in the know said AB InBev, which held majority equity stake of 75.1 per cent in IB prior to the offer, fully picked up its rights.

Heineken’s representative and interim chairman of Nigerian Breweries (NB) Plc, Mr Sijbe Hiemstra, had said the multinational stands ready to provide an initial commitment of up to N342 billion in new equity injection into the Nigerian subsidiary.

At the annual general meeting of NB held at the Muson Centre, Onikan, Lagos, shareholders had mandated the board to float a N600 billion rights issue as a means of capital restructuring aimed at boosting the company’s balance sheet.

Heineken, which holds 57 per cent majority equity stake in NB, stated that it was ready to pick its allotted rights. Market pundits said the provision on additional allotment allows Heineken to buy additional shares, citing the multinational’s history of increase in equity stakes in NB through secondary acquisitions.

Hiemstra, former Regional President for Africa and Middle East for Heineken, said the majority shareholder, Heineken has already indicated its readiness to support the recapitalisation exercise by taking up and paying for the portion of the shares allotted to it. Rights issue is traditionally pre-allotted on the basis of existing shareholdings.

Speaking at the annual general meeting, Hiemstra explained that the decision to seek approval for the capital raising was is in line with the company’s commitment to improving its financial position and returning the business to profitability while creating value for the shareholders.

According to him, the objective of raising fresh capital to the tune of N600 billion is to enable the company settle its outstanding foreign exchange (forex) payables as well as part of the local bank facilities.

He said the balance sheet restructuring would lead to the elimination of the naira devaluation risk or foreign exchange losses as well as the reduction of huge interest burden on the company.

“Following the challenging year 2023, and the present volatility of the Nigerian business environment, we are focused on our strategic recovery plan backed by parent company Heineken, prioritising efficiency and agility in all areas of operations; and maintaining market leadership through its rich portfolio of brands. We will continue to demonstrate resilience to deliver value for shareholders and all stakeholders,” Hiemstra said.

AB InBev’s latest investment underscored its history of commitments to the Nigerian market. It had in 2019 injected N124 billion or $341 million in IB in what was then Nigeria’s largest right issue. IB had then raised N165 billion, out of which AB Inbev provided N124 billion. AB InBev had earlier invested in capacity expansion including about N90 billion or $250 million in its Sagamu plant.

AB InBev had in 2017 merged its three indirect Nigerian subsidiaries-International Breweries Plc, Intafact Beverages Limited and Pabod Breweries Limited. The merger was done through a scheme of merger with IB subsisting as the post-merger company. The merger was seen as a major strategic move by Anheuser-Busch InBev to upend competition and consolidate its Nigerian base for further expansion into the Sub-Saharan Africa (SSA).

With the 2017 business combination, AB InBev’s majority equity stake in International Breweries increased to 75.1 per cent. A total of 5.302 billion ordinary shares were issued for the merger. With the supplementary listing of 5.302 billion ordinary shares, the total issued and fully paid up shares of International Breweries had increased from 3.294 billion to 8.596 billion ordinary shares.

The merger was believed to be a major competitive move by AB InBev to give its operations a major nationwide push to increase its market share. IB is located in Ilesa, Osun State in the South West region. Intafact Beverages’ brewery is situated in Onitsha, Anambra State in the South-East region while Pabod Breweries is located in Oginigba, Port Harcourt, Rivers Sate in the South-South region.

Prior to the merger, AB InBev held 72.17 per cent majority equity stake in IB through its subsidiary-Brauhaase International Management GMBH. SABMiller Nigeria Holdings BV-another subsidiary of AB InBev had held 75 per cent and 82.81 per cent majority equity stakes in Intafact and Pabod respectively. Ministry of Finance of Anambra State had held 10 per cent equity stake in Intafact while Ministry of Finance Incorporated of Rivers State held 14.52 per cent equity stake in Pabod.

After the merger of the three companies-SABMiller Nigeria Holdings BV and Brauhaase International Management GMBH hold 47.4 per cent and 27.7 per cent equity stake respectively in International Breweries, giving the foreign majority core investor controlling equity stake of 75.1 per cent. Ministry of Finance of Anambra State holds 4.7 per cent equity stake while other minority shareholders hold the remaining 20.2 per cent equity stake.

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