Shareholders and experts in the Nigerian capital market have attributed market forces of demand and supply and strategic information as some of the reasons for the share price appreciation of Honeywell Flour Mills Plc.
At the close of market yesterday, Honeywell Flour Mills recorded the highest price gain of 9.76 per cent to close at N4.05.
LEADERSHIP Friday findings showed that the shares of Honeywell Flour Mills Plc were still selling for N1.87kobo as at August, 2021. However, the appreciation of the company’s shares began when information about its acquisition by a bigger company filtered into the market.
On November 22, 2021, Honeywell Group Limited and Flour Mills of Nigeria Plc (FMN) announced the signing of an agreement that will see them combine FMN and Honeywell Flour Mills Plc. The agreement was stated to be valued at N80 billion is subject to regulatory approval and will see Honeywell Group Limited transfer a 71.69 per cent stake in Honeywell Flour Mills Plc to Flour Mills of Nigeria.
In the said deal, Honeywell Group Limited agreed to sell a 71.69 per cent stake in Honeywell Flour Mills to Flourmills of Nigeria.
As expected, this had a positive impact on the share price of Honeywell Flour, as the share price of Honeywell appreciated by 237.5 per cent year-to-date as at November 25, 2021 to N4.05 per share from N1.20 per share at which it opened trading on January 4, 2021. Also, Flour Mills shares up by 15.38 per cent year-to-date from N26.00 per share on December 31, 2020 to N30.00 per share at the close of trading on November 25, 2021. Also, Honeywell Flour Mills share capitalization rose from N9.51 billion in January 2021 to N32.117 billion as at November 25, 2021.
Currently, both companies owe about N220 billion in external loans per their 2021 half-year results.
In an exclusive interview with LEADERSHIP Friday, yesterday, a development economist and accomplished stockbroker, Dr Tayo Bello, said the forces of demand and supply as well as strategic information must have fueled the share appreciation of Honeywell Flour Mills. He ruled out any manipulation or market infraction saying no one could manipulate shares on the floor of the Nigeria stock exchange.
On the issue of debt owned by the two companies, he said debt is a tool for industrialisation which must be used judiciously. ‘‘There is no major company in Nigeria that is not owing,’’ he said.
On Wednesday, Ecobank Plc had advised FMN Plc against the purchase of stake in Honeywell Flour Mills due to unserviced loans by the latter. Following Ecobank’s letter addressed to Flour Mills of Nigeria (FMN) Plc’s managing director with regards to loans that have not been liquidated by Honeywell Flour Mill with the bank, investors of Honeywell Flour Mills Plc initiated massive sell-offs of the company’s shares reversing yesterday’s gains by 9.78%.
However, on Wednesday, Flour Mills of Nigeria Plc said in a statement that its Monday’s declaration to assume majority stakeholder position in rival Honeywell Flour Mills was made following “necessary due diligence and obtaining appropriate legal guidance.”
A stockbroker, the managing director of APT Securities and Funds Ltd., Mallam Garba Kurfi, told LEADERSHIP Friday, yesterday that FMN’s statement boosted the confidence of the investors which halted Honeywell share depreciation that was building up earlier in the week. He said FMN’s decision to acquire major stake in Honeywell Flour Mills might have been informed by the desire to consolidate market leadership in the industry.
Also, a chartered stockbroker and commodities broker, Sola Oni, told LEADERSHIP Friday that investors were buying the shares of Honeywell Flour Mills because they believe the company has potential.
The president, Honeywell Flour Mills Shareholders Association, Adebayo Adeleke, told LEADERSHIP Friday that the investing public has nothing to worry about the company as it was not the first time there would such transaction between two giant industry leaders.