Guinness Nigeria starts $126 million share sale to cut funding costs

Guinness Nigeria on Tuesday launched a share sale to raise 39.7 billion naira ($126 million) from existing shareholders to help lower its financing costs after reporting its first annual loss in 30 years last year, according to Reuters.

The beer maker, the local division of the world’s leading spirit maker Diageo, said funds raised will support Guinness in executing its strategy in the face of a recession in Africa’s biggest economy.

Guinness plans to issue five new shares to existing shareholders for every 11 held at 58 naira each, a 10.2 percent discount to Tuesday’s market price of 64.57 naira.

“Our expectation is that funds raised will help mitigate the impact of increasing finance costs, optimize our balance sheet and improve the company’s financial flexibility,” Chief Executive Peter Ndegwa said in a statement.

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. It said it had also received the green light from the Securities and Exchange Commission and the Nigerian Stock Exchange.

Last year Guinness acquired the rights to distribute Johnnie Walker whisky and Baileys liqueur in Nigeria and commissioned a 4.7 billion naira production line at one of its plant to produce spirits locally.

Guinness Nigeria shares, which have fallen 18 percent so far this year, shed 4.99 percent on the Lagos bourse on Tuesday. The stock fell 31 percent last year.

Africa’s top oil producer last year entered its first recession in 25 years, brought on by low oil prices, which have slashed government revenues and crippled dollar supplies in the country.