Following news of Diageo’s plan to sell its 58.2% stake to Tolaram, the market value of Guinness Nigeria Plc increased by 19.2% during the course of the last five trading sessions on the stock market.
As per several observers, the divestment process was expedited subsequent to Guinness Nigeria’s resolution to discontinue the importation of Johnnie Walker, Bailey, and other similar products.
Guinness Nigeria Plc declared in October 2023 that it would stop importing and distributing specific Diageo International premium alcohol goods in April 2024.
As the company’s earnings continue to be negatively impacted by exchange rate revaluation, it made the difficult choice to stop importing Johnnie Walker, Singleton, and Baileys beginning in April 2024.
According to its unaudited financial statement for nine months in 2024, Guinness Nigeria reported N82.97 billion as an FX loss. The huge amount lost to naira fluctuation was a result of foreign currency intercompany loans, US dollar-denominated letters of credit, and other FX liabilities. The loss of market access triggered Diageo’s decision to roll out the drum in the local market, where it had held sway as the majority shareholder in Guinness Nigeria Plc for years.
Details from the divestment notices showed that Tolaram Group will acquire Diageo’s 58.02% majority stake in the company at N81.60. According to data from the Nigerian Exchange, the deal price is a 48.91% premium to its current price of N54.80, with the transaction expected to be completed in 2025.
Details of the divestment deal showed that Tolaram will establish long-term license and royalty agreements for the continued production of the Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream spirits brands.
The Guinness brand will also be licensed to Guinness Nigeria for the long term. According to the disclosure, Tolaram plans to subsequently initiate a mandatory takeover in compliance with local regulatory requirements. This is expected to push its market value higher as local investors take advantage of premium payments, perhaps at takeover points.
