Diageo announced it would sell its 58.02% stake in Guinness Nigeria Plc to Tolaram, ending over five decades of direct ownership.
This implies that Tolaram will acquire Diageo’s shares at N81.60 per share, with a total transaction amounting to N103.7 billion, pending regulatory approvals.
Thus, Tolaram’s acquisition will integrate Guinness Nigeria into its extensive manufacturing, marketing, and distribution network, potentially reducing operational costs and improving financial stability.
For records, Guinness Nigeria Plc was first established in 1962 becoming the first brewery outside the British Isles. It was 100% owned by Arthur Guinness Sons & Co., which controlled the operations and strategic direction of the Nigerian entity.
The company remained this way until the seventies when Nigeria’s indigenization policy of the country required that Nigerians also own shares in foreign multinationals.
In 1997, Diageo became the majority shareholder after Arthur Guinness’ merger with Grand Metropolitan in 1997.
Since then Diageo has been the majority shareholder of Guinness Nigeria and invested heavily in its local manufacturing capabilities and strategic operations, until the recent announcement of its divestment.
As part of the terms of the agreement, Tolaram and Diageo will enter into a long-term license and royalty agreement, as Diageo remains the owner of the Guinness brand.
A significant part of the agreement is the cost implication, as Tolaram will be acquiring Diageo’s shares in Guinness Nigeria at a price of N81.60 per share, a 63% premium to the 30-day volume-weighted average price.
Diageo’s stake in Guinness Nigeria is managed through two subsidiaries: Guinness Overseas Limited, which owns 1,099,230,804 shares (50.18% shareholding), and Atalantaf Limited, which holds 171,712,564 shares (7.84% shareholding).
Essentially, Diageo holds 1,270,943,368.00 shares in Guinness Nigeria, thus, at a share price of N81.60, the transaction will amount to N103.7 billion.
However, the cost implications of the licensing and royalty agreement are not yet known.
Following the announcement of the deal, Guinness Nigeria’s share price surged by 8.41% to close at N54.80, up from N50.50.
Although the selling share price of N81.60 reflects a 63% premium from a 30-day weighted price of N50.06, it is just a 14% premium on the year-high price of N71.50.
The transaction is expected to be completed by the 2025 fiscal year-end, subject to regulatory approvals. By FYE 2025, it is not known what Guinness’ share price will be like.
It is important to note that Tolaram partly owns Dufil Prima Foods, which is a joint venture with Indofood and Kellogg’s. Dufil Prima Foods is famous for Indomie Noodles, Minimee Instant Noodles, Minimie Chinchin, Mimee Instant Noodles, and Power Oil. Minimee Pasta, Power Pasta, and Emperor.
Dufil Prima Foods also owns De United Foods Industries Ghana Limited (manufacturers of Indomie in Ghana). Tolaram also owns Multipro Consumer Products Limited, one of the largest consumer goods distribution companies in Africa.
Both companies are the exclusive distributors of Kimberly Clark products, Dufil Prima products, TG Arla, Colgate Palmolive, and Kellogg’s products in Nigeria.
TG Arla is another joint venture of Tolaram, this time with the Danish dairy company, Arla Foods. TG Arla imports and packages Dano milk in Nigeria.
Colgate Palmolive Tolaram is another joint venture by Tolaram, with Colgate. This joint venture is involved in the production of Hypo products and Colgate toothpaste.
Tolaram also has a footprint in the hair extension market through Lush Hairs, which is manufactured by its company, Lucky Fibres, previously involved in the manufacture of Nobel Carpets and Rugs.
Tolaram’s infrastructure and logistics footprint is in the Lagos Free Zone and Lekki Port. The group has 96.72% equity in Lagos Free Zone Corporation, the managers of the Lagos Free Zone, as well as a 22.5% stake in Lekki Port.
Tolaram is the parent company of BHN Logistics, one of the largest haulage logistics companies in the country.
Meanwhile, Tolaram’s acquisition of a majority stake in Guinness Nigeria expands the footprint of a group with a major stake in the Nigerian consumer goods sector.
The group has a very strong footprint in Nigeria through its joint ventures with other consumer goods companies across the world.
With its acquisition of Guinness Nigeria, Tolaram is stepping foot into the alcoholic beverage market, with a bid to assert its dominance in the Nigerian consumer goods market.
In Nigeria, the three biggest breweries in terms of market share and revenue size are Nigerian Breweries Plc, International Breweries Plc, and Guinness Nigeria Plc.
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