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Guinnes Share Price to Suffer As Diageo Calls Off Acquisition Deal

Diageo Plc has informed the investing public that it will no longer continue with the initial decision to acquire more shares of its Nigerian subsidiary, Guinness Nigeria Plc.  

The statement made available to the Nigerian Stock Exchange, reads: “Guinness Nigeria Plc hereby notifies the general public that further to its announcement on 9 September 2015 of Diageo Plc intention to make an offer through its wholly owned subsidiary Guinness Oversea Limited for up to 15.7% of share capital of Guinness Nigeria (the “Potential Offer”), it has received a letter from Guinness Overseas Limited confirming that it has taken the decision not to proceed with the Potential Offer. 


Diageo explained that the decision is “In the light of the challenging market conditions in Nigeria over the past 12 months”.  
The prevailing economic headwinds in Nigeria has affected adversely the Nigerian brewer so much that it recorded its first loss position in 32 years in 2015 financial year end.

 
Diageo has however, said that it maintains a positive outlook for Nigeria in the long-term and that it expects the market to continue to grow. 



Nigeria remains a key strategic market for Diageo which remains supportive of
Guinness Nigeria, a company with a long and rich history, its board and
management and the actions taken by Guinness Nigeria to mitigate the impact of
challenging market conditions.

 

 

Last year, the market was excited by the news that Diageo is making an offer of N175 per share for Guinness, at a time when the stock was trading at about N125. However, dwindling sales and a switch to a loss of about N2 billion has reduced its share price to about N97.9.

This sudden turn of events will negatively affect the share price further which has been battered in the past couple of months due to dwindling sales and profitability levels. The share price has dropped by as much as 33% in a year,
lower than the N125 price at the time an offer of N175/ share was
offered.
 

Last year, Diageo and Guinness completed a deal that had the latter acquire the distribution rights of Diageo’s spirit business in Nigeria.



This post first appeared on Stock Market Information | Investment Tips| Perso, please read the originial post: here

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Guinnes Share Price to Suffer As Diageo Calls Off Acquisition Deal

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