By JONAH NWOKPOKU

… Shareholders list conditions for acceptance
GlaxoSmithKline Consumer Nigeria Plc, GSK has resolved to commence fresh negotiation with shareholders over plans by its United Kingdom parent company, to increase its majority stake in the company.

Meanwhile, shareholders have listed conditions for accepting the bid by GSK United Kingdom to raise its shareholding to 75 per cent from 46.4 per cent.

“There must be something for both to take away from the table at the end of the day. That is what we are in the process of arranging now that we are to resume talks afresh”, said Mr. Olusegun Osunkeye, Chairman, and Board of Directors.

He spoke at a media parley at the end of the court-ordered meeting held last week Tuesday. “We feel it will be mutually beneficial for all shareholders to withdraw the scheme to allow for further consultations. We are going back to the drawing board, that is, GSK UK and GSK Nigeria to look at the new Scheme of Arrangement and to look again at the terms; so that with those two when concluded, further announcements will be made,” Osunkeye said.

The original agenda of the meeting was a resolution to consider and approve the Scheme of Arrangement for GSK U.K to increase its shareholding from 46.4 per cent to 75 per cent. But the company bulked and decided to withdraw the scheme due to opposition from shareholders. Alternatively, the company decided to use the meeting to formally announce the withdrawal of the scheme, engage, and interact with shareholders on acceptable options for GSK U.K to achieve its intention.

Osunkeye admitted that the thorny issues revolve around the right price to sell and willingness of shareholders to sell as well. He said that while the right price offered by GSK UK as at November, 2012 was reasonable and fair, it has become expedient to review the price to reflect the current economic realities.

“The price has now moved incidentally from what GSK UK originally offered the shareholders. At the time it was announced, it was at a price that most people considered fair. But since then, a few things have happened, the price on the Stock Exchange has moved in the range of N50 to N58. So it is a question of now having to revise and so dialogue and consultations are taking place.

“We could not conclude on where GSK  UK who is the one offering should approximately pitch the price. We have recommended that the price should move up. So the question now is at what level. This is where we are,” he said.

He further explained that, “When in November GSK proposed N48, it was a fair price because it has a premium built into it but six months later, that was no longer tenable because after November we had published our December Annual Account and have made more profits and paid dividends.

“If the company continues to grow profitably, therefore we would rather be looking again at this point in time at the price which will move upward because that is what has happened on the Stock Exchange. It is important to note that it is yet to pitch at the right price in the principle of fairness and the discussions will be going on, on that.

He however denied that there was any element of compulsion in the ownership bid, saying that no shareholder would be forced to part with his shares.

“We understand that the concern of shareholders is that nothing should be by compulsion, so we are also looking at that seriously and to know what the best option is,” he said.

Recall that the trouble started brewing for the company over who should own what when GSK Nigeria received signal from its parent company, GSK UK informing it of an intention to support it through upgrade of facilities but in order to do that on a sustained basis, it would like to increase its shareholdings in Nigeria.

GSK UK shareholding at present is 46.4 percent but  it intends to increase it to 80 percent. And that was where the problem started.

Mr. Osunkeye recalls how GSK Nigeria reacted initially to the proposal. According to him, “We said fine, if you are going to support us more, make further investments, upgrade of facilities, support on marketing and all areas, we will go along with you. They now said they will prefer a scheme of arrangement which is more certain in the sense that in the scheme of arrangement, they will propose to buy from existing shareholders such that they will get up to 80 percent.

“So we got our advisers, Chapel Hill and Ighodalo, but when we got to a point they said it will be N48. This was way back in November and the share price at the Stock Exchange at that time was N37, so there was premium. When we held our annual general meeting in May, we put this proposal of 80 percent at N48 to our shareholders but there were lots of oppositions from the shareholders in Nigeria and also from some of our institutional investors abroad.

“First, our shareholders said, 80 percent is too much for GSK UK to have. At that point in time in May we didn’t talk much about the price because the price was still fairly stable between N48. If it moved at all, it was upwards. So we went back to GSK UK and told them the feelings of the generality of the shareholders, that 80 percent is too high for them to absorb in view of certain experiences that our shareholders in Nigeria have had in the past with other companies.

“The shareholders also had this fear that 80 percent will lead next to delisting. So we went back to GSK UK and after conferring with them, raising the concerns with them, they came down to 75 percent and also made it clear that it was never the current intention to de-list from the Stock Exchange which means that they will continue to list as long as there is growth, and every shareholder will benefit.”

These concerns were still fresh in the minds of the shareholders during the court ordered meeting. Some of them who spoke to Vanguard saw it simply as a brazen attempt to rip them off their investments.  Hence they called for complete abandonment of the scheme, arguing that it was inspired by greed.

“The market in Europe is crumbling and African market is where the opportunities are. They have seen that the future of African market is very bright. That is the reason for this hostile attempt for indirect ownership increase. This proposal is a pure attempt to deprive us of what is our right but I must say that no Nigerian must be forced to part with his share,” a shareholder, Nonah Awoh said.

Adebayo Adeleke, the Secretary General of Independent Shareholders Associations, while condemning the proposal called on the company’s management to strive to follow due process and allow the law to take its course in their bid to reach a common ground with their shareholders.

But Mr. Osunkeye said nothing was being done outside the law. He recalled that the Stock Exchange approves that a foreign company according to its regulation can get up to 80 percent share increase.

He said, “GSK has decided that they want to do this within the laws of the country but Nigerian shareholders in view of their experiences in the past and so on decided that that 80 percent is too much.”

In the meantime, the shareholders  have  decried subtle compulsion and unfairness in the entire process and are therefore specifically asking that if they are going to sell at all, it would be at their chosen price of N75. They are also asking that global best practices be observed in the process whereby GSK UK, the bidding company be forbidden from voting.

But Osunkeye said fairness has been the principle hallmark upon which the process has been built and argued that Nigeria’s current economic development and evolution would not allow for the global best practices that the shareholders are calling for. This idea, he said, might scare away willing and capable entrepreneurs who would have listed on the Stock Exchange and enhance economic growth.

“You see, in the UK, GSK UK as a UK company, under their practice, will not be allowed to vote in that scheme, so Nigerian shareholders are now saying that, that practice must be observed here in Nigeria. But my personal view is that, even though it is called global best practice, and we subscribe to global best practice, we must not forget that in every country, they have their deflections and adaptations to suit their conditions.

“After all,  this idea that a company in UK will not be allowed to vote in shares has not been there forever, it’s something that started about last ten years. So it is a reflection of their economic development. They feel they can now move to that area. Maybe there are no majority shareholders anyway. So there is diffused ownership and the system in our country should rather be to encourage the few entrepreneurs who have the wherewithal to list on the exchange. There is dichotomy there. Our interest in respect to the state of our economic development is not yet in line with the interest in UK because they are more advanced and their environment is very much different,” he explained.