LAGOS, March 15 (Reuters) - Guinness Nigeria said on Wednesday it had applied to the Nigerian Stock Exchange to get approval for a share sale to raise 39.7 billion naira ($130 million), its chief executive told Reuters.
The company, the local division of the world’s leading spirit maker Diageo, said it would issue the shares to existing shareholders at 58 naira each, a 21 percent discount to Wednesday’s market price. Shareholders would be offered five new shares for every 11 held.
The company, which is 54 percent owned by Diageo, reported in September last year a pretax loss of 2.35 billion naira for the year ended June 30, its first annual loss in 30 years, triggering the share sale.
Shareholders approved the sale in January.
“Our expectation is that this rights issue will help mitigate the impact of increasing finance costs, optimise our balance sheet and improve the company’s financial flexibility,” Peter Ndegwa, chief executive Guinness Nigeria, said.
“We expect that this issue will help us ... return the company to profitability in the long term,” he told Reuters
Guinness Nigeria shares, which have fallen 18 percent so far this year, rose 2.9 percent to 70 naira on the Lagos bourse on Wednesday. The stock fell 31 percent last year.
Africa’s biggest economy is in its first recession in 25 years, brought on by low oil prices, which have slashed government revenues and crippled dollar supplies in the country, making life difficult for businesses.
In October, Diageo scrapped plans to increase its stake in Guinness Nigeria due to the tough conditions in one of its biggest markets for the world-famous stout. But it granted the Nigerian division a $95 million loan facility to help it to cope with the dollar shortages.
As of October last year, the Nigerian subsidiary had only drawn $30 million from the facility.
Diageo intends to convert the outstanding loan granted to Guinness Nigeria into equity via the rights issue, the company has said, adding that it believed this was beneficial in the wake of the weakening naira currency.
The naira lost a third of its official value against the dollar last year and has been quoted at even weaker levels on the black market this year. ($1 = 305.20 naira) (Editing by Jane Merriman)