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Dangote Industries explains repurchase of former subsidiary

By on December 24, 2015

Dangote Industries Limited (DIL) bought back its former subsidiary, Tiger Branded Consumer Goods (TBCG)  to prevent the company from going under and save over 3,000 jobs of Nigerians, sources close to the deal said on Tuesday.

TBCG, formerly Dangote Flour Mills Plc, was acquired by Tiger Brands, a leading South African fast-moving consumer goods company in 2012. But after years of losses, it announced its withdrawal of further funding last month. The withdrawal of funding  made Alhaji Aliko Dangote to  resign as the chairman of the board. Similarly,  three other directors – Olakunle Alake, Arnold Ekpe and Asue Ighodalo- left the board of the TBCG.

However, less than one month after, DIL was approached by Tiger Brands to acquire its 65.7 per cent shares of TBCG Limited. Some stakeholders had  questioned the rationale behind the investment decision by DIL. But  sources close to the Dangote Group said the company had to consider the repurchase of TBCG so as to keep the company as a going concern, which preserves value for the minority retail shareholders and  also secured direct employment for over 3,000 employees.

“Going by every indication, the future of the company was very doubtful and that was risky for the employees which are over 3,000 Nigerians apart from others who benefit from the company’s services through other ancillary services. The return of DIL is therefore a big relief and good decision to save the jobs of the staff of  TBCG,” a market operator said.

In the the repurchase agreement, subject to regulatory approvals, DIL will provide TBCG with an immediate cash injection of N10 billion. In return, Tiger Brands will divest its 65.7 per cent shareholding in TBCG to DIL for a nominal consideration and write off its shareholder loans to TBCG.

In addition, Tiger Brands will assume and settle outstanding debt guaranteed on behalf of TBCG. Already, the former directors of TBCG, Alake, Ekpe and Ighodalo have agreed to re-join the board of TBCG and have consequently been reappointed with effect from 10th December 2015.

The companies have explained that the transaction will ensure that TBCG is maintained as a viable going concern, able to retain its employees and meet its obligations to its stakeholders.

“The Transaction envisages that sufficient capital will be injected into TBCG in order to stabilise the business and place it on a sustainable path aimed at creating value for its stakeholders,” they said.

 

[ThisDay]