Flour Mills of Nigeria Plc.(FMN) has concluded arrangement to sell 1.47 billion ordinary shares to existing shareholders at N27 per share to generate N39.86 billion at a 21 percent discount.
The Nigerian Stock Exchange (NSE) in a statement on Friday, December 8, notified dealing members that FMN has through its stockbrokers, Stanbic IBTC Stockbrokers Limited, submitted an application for approval and listing of a rights issue of 1,476,142,418 ordinary shares of 50 Kobo each at N27.00 kobo per share on the basis of nine new ordinary share for every 16 ordinary shares held.
The company had in October indicated that its board of directors has given approval in principle to its plans to commence with activities to raise additional funds through a rights issue and medium-term notes.
In a notice to the NSE at that time, it specifically disclosed that it had registered a shelf fundraising program in 2016 with the Securities and Exchange Commission to raise up to N40 billion in equity funds through a rights issue.
However, the shelf programme has been placed on hold since its registration. Perhaps the seeming improvement in the macroeconomic environment, a condition the management had said was necessary for the right issue may have prompted the need to commence the exercise.
In addition to that, the company is also planning to raise N70 billion through medium-term notes. It affirms that it has commenced discussions with stakeholders – financial advisers, legal advisers and issuing houses to determine the right time and cost for issuing such financial instruments, which will eventually be duly registered with the proper financial bodies.
Market analysts are of the opinion that the market climate remains unfavourable for the right issue, as the price of Flour Mill’s stock had barely moved since the fundraising was first announced.
However, the stock price rallied Friday, perhaps indicating the right issue announcement appealed to investors, which would encourage the management to progress with the fundraising.