Controversy trails Presco’s proposed N23bn acquisition of SNL

By AYOOLA OLAOLUWA

The ‘planned’ acquisition of SIAT Nigeria Limited (SNL) by Presco Nigeria Pls., a leading palm-oil processing firm listed on the Nigerian Stock Exchange, is currently generating controversy in the industry, Business Hallmark can reliably reveal.

The board of the palm-oil processing firm, it would be recalled, had in June 2021, informed its shareholders, The Nigerian Exchange Group and the investing public it planned to expand its business by acquiring 100% shares of an existing private company limited by shares and in the same line of business with the company. It however failed to declare the identity of the company.

However, on March 8, 2022, Presco publicly revealed the identity of the company it intended to take over as SIAT Nigeria Limited (SNL), a private company that also operates in the agricultural sector, for N23 billion cash. According to the firm’s management, the acquisition will allow it to merge with SNL, which will then unlock opportunities in the combined entities.

It futher projects that the benefit of acquiring SNL would lead to combined earnings per share of N25.9 by 2025 as against the current N18.6.

The market responsed to the news, with a share of Presco which opened on the trading floor of the NGX at N104.5 on March 9, 2022, closing at N114.95, a 52-week high at the end of the day’s trading. The firm is currently the 22nd most valuable stock on the NGX, closing its last trading day (Friday, March 18, 2022) at N133.00 per share.

According to BH checks, Presco began 2022 with a share price of N87.80, meaning it has gained 51.5% since the beginning of the year, ranking it sixth on the NGX in terms of year-to-date performance. Industry stakeholders who spoke with our correspondent on the development attributed the continued price appreciation to the ‘planned’ acquisition of SNL by the palm oil processing giant.

Details of the deal obtained by BH include the acquisition of SNL’s assets, including Risonpalm, a 16,000 hectares of old palm plantations, as well as the entire social and industrial infrastructure of the industrial oil palm complex from the Rivers State Government for N200 billion.

However, controversies, particularly that of lack of corporate governance, have continued to trail the purchase. The controversy is being fuelled by the 2021 full-year results just released by Presco which revealed that the acquisition deal had been concluded and the sum of N23 billion already paid for the acquisition of SNL without the approval of shareholders.

In the balance sheets, SNL was included as Presco’s investment asset. While the 2021 full year report showed that the acquisition process had already been concluded, the company meanwhile is now asking for the approval of shareholders to sanction the deal.

“In line with the requirements of the NGX on related party transactions, SIAT SA, the core shareholder of SNL and a significant shareholder in Presco, will not be voting on the resolutions to approve the acquisition. To this end, the decision to proceed with the acquisition will be made by the minority shareholders of Presco.

“The Board of Presco having considered the terms and conditions of the acquisition, as well as the benefit thereof, recommend that you (shareholders) vote in favour of the special resolutions which will be proposed at the Annual General Meeting (AGM)”, parts of the statement read.
What this means is that neither the SNL, owned 100% by SIAT Group, the parent company of Presco Plc which owns 60% of Presco, nor the minority shareholders who own the remaining 40 percent shares did not ratified the sale before money exchanged hand.

‘Who then signed off on the deal’, is the question on the lips of many aggrieved shareholders who spoke with our correspondent.

“If the SIAT Group which owns 60% of Presco is not eligible to vote, according to NGX requirement, who then consumated the deal when minority shareholders with the remaining 40% stake are just being lobbied to sign off on the deal at the next AGM?

“The whole process (acquisition) reeks of corruption. It has created new challenges from operational, regulatory and compliance perspectives.

“As I see it, this request for shareholders to approve the proposal is merely a request to rubber-stamp a deed that had already been carried out.

“What is the point of seeking minority shareholders’ approval for a transaction that insiders in the company have already consummated?

“Where is corporate governance in all these? A systemic failure of corporate governance is also a failure of the whole set of regulatory, market, stakeholder, and internal governance.
“Business managers must ensure they remain disciplined, transparent, independent, accountable for their actions”, said a minority shareholder who did not want his identity disclosed for fear of intimidation.

Another interested party who spoke with our correspondent noted that the deal would normally have been a good one for shareholders to approve, only that they were not carried along in the process.

“What are they hiding from us? Normally, it should be a welcome development as it is going to be a win-win situation for everyone.
“But the way it was carried out leaves a sour taste in the mouth. Why should they ask for our ratification when the deed has already been done?

“It is an insult and an unforgivable slight. Despite the fact that the transation favours us, the worry of most shareholders is that if they can do this without any regulatory approval, they can as well undermine our interest and get away with it”, declared another worried shareholder.

Another issue that is bothering stakeholders is the ownership structure of Presco and the undue influence by its majority shareholder.
A cursory look at the ownership structure of Presco shows that the SNL which was recently acquired by Presco is wholly owned by the SIAT Group, the parent company of Presco which in turn owns 60% shares in Presco. According to NGX laws, SIAT, being a related party to the companies in the deal (owns 60% shares in Presco), is not expected to vote when the approval is tabled to shareholders.

However, the decision to sell had been reached with the whole deal consummated only by SIAT, the majority shareholder of Presco. This, worried shareholders stated, raised the question of regulatory failure on the part of the NGX.

Some of the minority shareholders who agreed to talk to BH questioned the role played by the industry regulator, the Nigerian Exchange Group and Stanbic IBTC Pensions, a major minority shareholder with 7% stake in Presco in the deal.

“If there is nothing sinister behind the transaction, why should it be consumated in secret? Let’s just hope that the NGX and Stanbic IBTC Pensions Nigerian Exchange Group will do the needful by addressing this glaring anomaly in order to douse the fears of smaller shareholders like us”, a concerned stakeholder advised.