Ecobank, Sterling Bank, UBA underwrite Dunlop shares
Category: Public Offers Private Placements
The Ecobank Nigeria Plc, United Bank for Africa and Sterling Bank Plc, are puting total of N4.13 billion on a stand by to back up the on-going hybrid offers of Dunlop Nigeria Plc.
In a form of underwriting agreement that will give the investing public the first right of claim to the shares offer, the three banks have undertaken to provide above amout to invest in the on-going rights and public issues of Dunlop Nigeria should the investing public failed to clear all the shares on offer.
United Bank for Africa and Sterling Bank are participating in the underwriting through UBA Global Markets and Sterling Capital Markets Limited, their investment subsidiaries while Ecobank Nigeria Plc is backing Dunlop Nigeria with the full weight of the Ecobank brand.
Speaking recently, Abimbola Olashore, executive director, wholesale banking group, Ecobank Nigeria Plc, said the decision of the three banks to provide as much as N4.13 billion as stand by funds to acquire shares in the event of any leftover show the enormous confidence that the financial institutions have in the prospects of Dunlop Nigeria . He noted that critical company assessment and risk-reward measurement undertaken by the investment bankers and other analysts show Dunlop Nigeria as a good investment that could yield significant returns to investors.
He pointed out that future earnings flow and the market potential for the tyre and automobile industry and the fact that Dunlop Nigeria had just completed a major expansion in the form of its All Steel Radial Tyre (ASRT) plant are n support of designation of Dunlop Nigeria as a viable growth stock. Olaseni Oduwole, head, corporate finance, Sterling Capital Markets Limited, said they expressed readiness to provide stand-by funds for participation in the Dunlop NigeriaÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢s offers after careful consideration of the earnings outlook of the company.
He noted that the huge discount between the market price of N4.16 on the Nigerian Stock Exchange (NSE) and the offer prices of N2.30 and N2.50 provides immediate lock-in value to investors adding that the shares still have appreciable room for capital appreciation post listing.
He expressed confidence in the current management and board of Dunlop Nigeria pointing out that with addition of the new ASRT factory and good marketing and managerial strategies, the company is bound to witness impressive growths in the years ahead. Mohammed Yinusa, managing director, Dunlop Nigeria Plc, has also said that the on-going offers will significantly reduce financing charges and financial leverage of the company, putting it in better position to pass most benefits of recent expansion to shareholders.
According to him, the company has invested in future growth through the N7.2 billion ASRT factory which, along with other established products, should sustain the company as a leading tyre company in West Africa in several years ahead.
Dunlop Nigeria is offering 756 million ordinary shares of 50 kobo each to existing shareholders at N2.30 per share and also more than 1.5 billion ordinary shares of 50 kobo each to the general investing public through a public offer for subscription at N2.50 per share. The two offers opened on November 29, 2006 and will close on January 5, 2007.
The net proceeds of the offers estimated at N5.2 billion will be used as additional working capital to back up the companyÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢s expansion as well as to refinance bank loans taken to part-finance ASRT project.
Under the terms of the underwriting, the three leading investment bankers jointly agreed to take up to about 1.7 billion ordinary shares of 50 kobo each totaling about N4.13 billion, representing 75 per cent of the total of 2.26 billion ordinary shares of 50 kobo each currently on offer.
It should be recalled that major shareholders groups including Akintunde AsaluÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢s Nigeria Shareholders Solidarity Association (NSSA), Independent Shareholders Association of Nigeria (ISAN), Association for the Advancement of Rights of Nigerian Shareholders (AARNS) among others have thrown their weights behind the offers, stating that the shares are good investment opportunities.
Provisional reports from stockbroking firms and financial institutions across Nigeria however have showed massive subscriptions by shareholders and the general investing public. Parties to the offers said interim reports so far show that Dunlop NigeriaÃƒÆ’Ã†â€™Ãƒâ€ Ã¢â‚¬â„¢ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã‚Â¾ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¢s may be heading for oversubscription, given subscription levels across the country. - businessday