Tolaram Group to acquire 58.02% shares in Guinness Nigeria as Diageo exits

In a landmark deal set to reshape Nigeria’s beverage market, Singapore-based Tolaram Group has agreed to acquire Diageo’s 58.02per cent shareholding in Guinness Nigeria Plc.

Guinness made this announcement via a press release on the website of the Nigerian Exchange Limited (NGX).

This announcement is the latest in a string of major multinational organizations exiting the country citing tough economic challenges.

The transaction is expected to close in fiscal 2025 pending regulatory approvals.

“Under the terms of the agreement signed on Tuesda. Tolaram will enter into a long-term licence and royalty agreements for the continued production of the Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream spirits brand,” a statement from Guinness Nigeria said.

Guinness has a market capitalization of N110.7 billion based on its current share price of N50.5 per share suggesting the deal could top over N64 billion.

Diageo, while selling its controlling stake, will maintain ownership of the Guinness brand, ensuring its legacy continues under the stewardship of Tolaram.

According to the company, this move aligns with Diageo’s “strategic vision to retain brand influence” while leveraging Tolaram’s “extensive” distribution and manufacturing capabilities.

With over fifty years in Africa, Tolaram is one of the continent’s leading consumer packaged goods companies.

It has a history of successful joint ventures with leading multinational corporations, and this deal potentially reinforces its position as a trusted partner in the African market.

The acquisition also marks a significant expansion of Tolaram’s footprint in Nigeria, promising enhanced innovation and value delivery to customers and shareholders.

Board Chair of Guinness Nigeria, Omobola Johnson  hailed the deal as a pivotal moment for the company.

“This partnership brings together Tolaram’s deep expertise in manufacturing and distribution with Diageo’s exceptional brand-building and innovation capabilities. It positions Guinness Nigeria for robust growth in this dynamic market,” she said.

Managing Director and CEO of Guinness Nigeria, Adebayo Alli echoed these sentiments, expressing enthusiasm for the collaboration.

“This announcement marks an exciting chapter for Guinness Nigeria. Tolaram’s alignment with our values and commitment to sustainability and enduring business success bodes well for our future,” Alli stated.

Managing Director of Tolaram Africa, Haresh Aswani  expressed his excitement about the strategic acquisition. “Welcoming Guinness Nigeria, a company with such a rich legacy and strong consumer loyalty, into our ecosystem is thrilling. This move will expand our significant footprint in the Nigerian market and leverage our combined strengths to foster innovation,” Aswani noted.

The announcement comes at a challenging time for Guinness Nigeria. The company recently reported a loss after tax of N61.7 billion for the nine months ending March 31, 2024, a stark contrast to the N5.9 billion profit in the same period the previous year.

Despite a 28% year-on-year revenue growth to N220.3 billion, significant foreign exchange losses, totaling N83 billion, and a pre-tax loss of N60.5 billion have severely impacted the company’s financial health.

The financial strain has wiped out Guinness Nigeria’s retained earnings, pushing the company into a negative equity of N4.7 billion.

The interest expenses on loans and borrowings surged by 490% year-on-year to N5.6 billion, compounding the fiscal challenges. Despite these setbacks, Guinness Nigeria remains optimistic about its future.

The company states it is focusing on “innovation and operational excellence” to navigate the financial turbulence and is confident in its resilience and strategic vision for long-term sustainability and shareholder value.

Following the acquisition, Guinness Nigeria will continue to be listed on the Nigerian Exchange Ltd where Nigerians still own minority shareholdings.

However, Tolaram also intends to launch a mandatory takeover offer, complying with local law requirements, which will provide existing shareholders an opportunity to exit or participate in the company’s restructured future.