NIGERIA – The planned acquisition of Honeywell Flour Mills Plc (HFMP) by Flour Mills of Nigeria (FMN) Plc has hit a brick wall as pan-African banking conglomerate, Ecobank Nigeria Plc, has challenged the move by placing a caveat on the deal.
Earlier last week, in a joint communique the two-wheat processing outfits, announced the signing of a proposed combination of FMN through its affiliates and HFMP.
Under the proposed agreement, HFMP’s parent company Honeywell Group Limited will dispose 71.69% stake in the manufacturer of diverse and differentiated range of wheat products, to FMN based on an enterprise value of N80 billion (US$193m).
However, the final equity price per share payable will be determined based on HFMP’s adjusted net debt and net working capital at the date of completion which has not yet been revealed and is subject to approval from the appropriate regulators.
In a separate statement, FMN announced it had entered into an agreement with First Bank of Nigeria Limited to acquire the bank’s 5.06 per cent equity in HFMP.
“Consequently, upon completion of the acquisition, and subject to obtaining all requisite regulatory approvals, FMN is set to hold a circa 76.75 per cent equity interest in HFMP,” it said.
However, Ecobank Nigeria has challenged the deal on the grounds that the company is hugely indebted to it despite denials, reports This Day.
Ecobank has placed a caveat on any share of HFMP and that the debt is currently a subject of litigation.
The financial institution highlighted it had advanced several loan facilities which included working capital disbursements to HFMP and that due to the failure of the company to liquidate the said loan facilities, it was constrained to commence winding up proceedings against Honeywell Group Limited at the Federal High Court, Lagos in suit no: FHC/L/CP/1571/2015.
The bank said that Honeywell Group Limited, being respondent to the winding up petition, objected to the jurisdiction of the trial court to preside over the said suit, this the bank said was upheld by the trial court.
Aggrieved with the decision of the trial court, Ecobank said it filed an appeal (with appeal No: CA/L/1041/2016) at the Court of Appeal, Lagos Division and that upon review of Ecobank’s case, the appellate court found merit in the appeal, and held that the winding up proceedings against Honeywell Group Limited was properly commenced and that the Federal High Court had jurisdiction to hear the said petition.
Ecobank said that while the said decision of the Court of Appeal has been appealed to the Supreme Court, the Court of Appeal’s judgment remains valid and subsisting till date.
It indicated that Honeywell Group Limited is legally estopped from sequestering and/or disposing any of its assets pending the final determination of the winding up action commenced against it.
Consequently, the bank demanded that FMN in its best corporate interest immediately cease and desist from consummating the subject transaction which aims to divest the assets of a company being wound-up (Honeywell Group Limited).
Determined to proceed with the deal, FMN and Honey Well Group in their response, said the proposed acquisition is not in breach of any court order.
“The issue as to whether HFMP is indebted to Ecobank is still before the courts and the final decision remains the exclusive preserve of the courts.
“It is also important to state that the Court of Appeal judgement being referred to in the reports did not declare HFMP to be indebted to Ecobank,” said Honey Well Group.
The company assured investors, regulators and stakeholders that in all of its engagements with FMN, it received independent legal advice.