On Monday, September 20, 2021, shareholders of UAC Nigeria Plc will gather for a court-ordered meeting (COM) to decide on what to do with the shares of the company in UPDC Real Estate Investment Trust (REIT).
Business Post reports that on Friday, July 23, 2021, the company obtained an order from a federal high court to convey a meeting of shareholders concerning the subject matter.
As part of a strategic review in 2018, the board and management of UAC Plc agreed that in the best interest of the company and to deliver more value to shareholders, it was necessary for the organisation to exit from its investments in the real estate sector in order to focus on the sectors that align with its core strategy.
UAC has the aim to generate attractive long-term, risk-adjusted returns for investors by growing its businesses into market leaders in their respective segments.
But because it was getting involved in different sectors, achieving this target was becoming difficult and it felt it was necessary to trim its operations to its core area of expertise.
The firm operates in animal feeds and edible oils, packaged food and beverages, paints, logistics, quick service restaurants (QSR) and real estate through UPDC Plc.
In 2020, UAC, as part of the unbundling strategy, reduced its ownership in UPDC from 93.86 per cent to 42.85 per cent following the sale of a 51 per cent stake to Custodian Investment Plc.
Last year, UPDC embarked on a process of unbundling its holdings in UPDC REIT to all its shareholders to maximise returns to its investors by providing direct access to the steady and regular dividend distributions of UPDC REIT as well as improving trading liquidity in UPDC REIT units.
As a result, UPDC transferred 649,392,661 units of UPDC REIT stocks to UAC, which still remains as one of its shareholders.
The board of UAC wants to transfer the 649,392,661 units of UPDC REIT shares it received from UPDC to its shareholders, necessitating the COM to be held in a month’s time.
At the meeting to be held virtually at 10:00 am, shareholders would be expected to approve “the transfer of the units held by the company in UPDC REIT to the eligible shareholders of the company (as defined in the scheme document) based on the application of the allocation ratio as specified in the scheme document.”
Business Post gathered the transfer of UPDC REIT units to UAC shareholders will be implemented through a scheme of arrangement under Section 715 of the Companies and Allied Matters Act (CAMA), 2020 as amended, incorporating a reduction in share capital under Section 131 of CAMA (the Scheme). The effect of this is that the units of UAC in UPDC REIT will be transferred to shareholders, pro-rata to their shareholding in UAC.
If the scheme is approved and when it is implemented, UAC’s shareholders will hold UPDC REIT units in addition to their existing shares in UAC and UAC will cease to be a unitholder in UPDC REIT.
This means UAC will no longer be a direct shareholder in UPDC REIT but eligible shareholders of UAC will become the direct shareholder of UPDC REIT.
As a result, the share capital account of UAC will reduce by N3,896,355,966, being the value of the transferred units through the reduction of its share premium account and the share premium deduction amount shall be transferred into the UPDC REIT unbundling liability account.
UAC has said a day after the COM, it should file the resolutions with the Corporate Affairs Commission (CAC) and on October 20, the formal approval of the Securities and Exchange Commission (SEC) is expected to be obtained and on November 4, a sanction of the scheme should be obtained from the court, while a day after, the Certified True Copy (CTC) should be sent to SEC.
It stated that after the last trading day to qualify for the scheme (eligibility date) on November 8, it would register the CTC of the court sanction at the CAC on November 11 and the next day, this would be published in two national newspapers and on November 18, the accounts of the eligible shareholders would be credited with the corresponding number of shares and on November 22, the summary report would be filed with SEC.
Source: Business Post
