Nigeria’s largest company by market capitalisation, Dangote Cement PLC, has announced its plan to repurchase up to 10% of its issued share capital.
The decision is subject to shareholders approval at the forthcoming Extraordinary General Meeting (EGM) scheduled to hold on 22nd January 2019.
This and other relevant details are contained in the company’s notice to the Nigerian Stock Exchange (NSE), posted on the latter’s website today.
Share buyback refers to a transaction whereby a company buys back its own shares from the marketplace. The company may buy shares directly from the market or offer its shareholders the option of tendering their shares to the company at a fixed price. A share buyback reduces the number of a company’s outstanding shares, thereby increasing both the demand for the shares and price.
The board of the cement manufacturing giant had on 29th October 2019 mooted the idea of embarking on a share repurchase and stock consolidation programme, subject to obtaining detailed advice and regulatory approvals after which shareholders endorsement would be sought.
The EGM seeks among other things to amend the Articles of Association of the Company by incorporating new Clauses 10, 11 and 12 into the Article, all of which will confer on the company the power to undertake alteration of its share capital and the purchase of its own shares.
Lagos-headquartered Dangote Cement is Africa’s leading cement producer with presence in ten African countries. With 17,040,507,405 current issued shares valued at around N2.386 trillion, the firm is currently the most capitalised stock on the NSE.
The proposed share buyback seeks to repurchase up to 1,704,050,741 of Dangote Cement’s shares. The programme is anticipated to be completed in the twelve months from the receipt of the approval of shareholders for the programme.
The programme will be executed through open market and/or self-tender offer.
The statement cites the reasons for embarking on the share buyback programme to include its potential of increasing long term shareholder value, being valuable tool for managing capital structure and balance sheet efficiency and being a window to return cash to shareholders.
The programme is to be funded from the company’s reserves.