GSK sells drinks business to Suntory following shareholder approval

Shareholders of GlaxoSmithKline Consumer Nigeria Plc have approved the proposed divestment of its drinks business to Suntory Beverage and Food Nigeria Limited. The decision was one of the major highlight of the company’s Annual General Meeting (AGM) and Extra Ordinary General Meeting (EGM) held in Lagos earlier this week.

While notwithstanding the decline in profitability in 2015 financial year, GSK Nigeria will be paying shareholders that their names appears on the registrars of the company on June 1, 2016, a total dividend of N358.7 million, representing 30 kobo per share, subject to appropriate withholding tax deduction.

However, following the approval, shareholders are to also get a special dividend of N716 million, which represents 60 kobo per share and subject to appropriate withholding tax deductions once the transaction has been sealed. According to GSK Nigeria board, they estimate that the transaction presents an opportunity for them to focus on growing the GSK Consumer businesses.

The transaction which will fetch GSK Nigeria a headline price of 79.2 million dollars, started on January 25, 2016 when they received a non-binding offer from Suntory for the acquisition of the company drinks business and following intense negotiations, on May 31, 2016 GSK Nigeria agreed on the terms of the proposed sale of the drinks business.

Areas where the proceeds will be deployed include, payments of taxes, cost of transaction, debts which involves intercompany / trading arrangements, dividends, and investment to grow the retained business. Other detail of the transaction includes the disposal of a portion of the factory, the distribution infrastructure, warehouses and distributors.

As part of the deal, employees who are involved in the drinks business will be offered employment by Suntory on terms and conditions, no less favourable to their current terms. The disposal of Agbara manufacturing facility for the drinks business and the associated 6.45 hectares of the Agbara land will enable GSK Nigeria to invest in the future in purpose built facilities to support the retained GSK consumer business.

GSK Nigeria will also retain the production equipment used in its consumer business and will lease from Suntory those areas of Agbara facility, which are used in the production of products for its consumer business for a minimum period of five years after completion of the transaction until production is relocated.

This is in addition to the 3.45 hectares of land reserved for GSK Nigeria out of the total 9.9 hectares available. Parts of the transaction agreement is that GSK Nigeria will provide information technology and certain other transitional services to Suntory at a cost, for a short period up to one year or as otherwise extended following completion of the transaction. This will enable the separation of the drinks business including the manufacturing facility and to allow for smooth transition to Suntory.

It would be recall that in September 2013, GlaxoSmithKline Group globally divested Ribena and Lucozade brands to the Suntory Group. At that time GSK Nigeria secured the rights to continue to manufacture and distribute the products in Nigeria, under a ten years arrangement which ends on August 18, 2023. After that date the rights to manufacture and distribute Lucozade and Ribena in Nigeria will revert to Suntory and the company will have no further rights to sell these products.