Vanguard (Lagos)

22 November 2012

Nigeria: SEC Approves Flour Mills, Bagco Merger Arrangement

The Securities and Exchange Commission, SEC, has given its approval-in-principle to the proposed business combination involving Flour Mills and Nigerian Bag Manufacturing Company Plc (Bagco) and its subsidiaries - Northern Bag Manufacturing Company Limited and Bagco Morpack Nigeria Limited.

The scheme of the merger will result in the transfer of all assets, liabilities and undertakings of Bagco and Bagco-North to Flour Mills, while the entire issued share capital of Bagco and Bagco-North respectively would be cancelled.

Consequently, Flour Mills will become the surviving entity at the end of the merger process, while Bagco and Bagco-North will be dissolved without winding up.

In a notice filed, Tuesday, with the Nigerian Stock Exchange, NSE, Flour Mills said that the respective board of directors of both companies has agreed that shareholders of Bagco will get one ordinary share of Flour Mills in exchange for 25 ordinary shares they previously held in Bagco or "or a cash consideration of N2.75 for each ordinary share of Bagco as at the Effective Date."

The cash consideration of N2.75, according to the company, will represent 39 percent premium to Bagco's closing share price as at 16th November 2012, and a 68 percent premium to Bagco's closing share price as at 5th September 2012, the date prior to announcement of the Transaction.

The companies had said that they intend to undertake the merger of their businesses in order to streamline their operations and reduce administrative costs.

Other reasons adduced by the companies include the need to improve operating efficiency and capture the full synergies arising from the merger, which, in turn will result in a significant enhancement of shareholders' value.

Flour Mills noted, however, that the consideration, as well as other terms of the transaction is still subject to final approval of the SEC, the Federal High Court, The Nigerian Stock Exchange, and the respective shareholders of Flour Mills and Bagco.

FCMB Capital Markets Limited, Zenith Bank Plc, and Stanbic IBTC Bank PLC are advisers to the arrangement.

It would be recalled that in its resolve to further expand its business interest in agric sector, Flour Mills had recently acquired controlling interest in Thai Farm.

According to Flour Mills, the acquisition confirmed the company's unalloyed support for the Federal Government's Agricultural Transformation Agenda having already commenced major agro-allied investments in the areas of rice cultivation and milling; Sugar growing, milling and refining; maize and Soya beans growing; palm oil cultivation and refining; and production of animal feeds.

By the acquisition therefore, flour Mills would be able to ensure consistency in quality, availability and affordability of High quality Cassava Flour, HQCF.

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