Under the terms of an agreement signed today, 11 June 2024, Tolaram will acquire Diageo’s 58.02% shareholding in Guinness Nigeria, in another blow to President Bola Tinubu’s reforms aimed at attracting foreign investors.
Guinness and Tolaram will enter into long-term license and royalty agreements for the continued production of the Guinness brand and its locally manufactured Diageo ready-to-drink and mainstream spirits brands.
The transaction is expected to be completed during Fiscal 2025, subject to obtaining the requisite regulatory approvals in Nigeria.
Rising foreign exchange revaluation losses brought on by the depreciation of the Naira pushed Guinness Nigeria Plc into record loss in the third quarter (Q3) that ended in March 2024 as inflationary pressure continues to drive pressure in cost.
For the period, Guinness Nigeria posted a loss after tax of N56.4 billion.
The net loss was largely driven by a foreign exchange revaluation loss of N90.2 billion as consumer goods firms bear the brunt of the unification of the foreign exchange market.
Major firms exit Nigeria
Last week, Kimberly-Clark Corp., maker of the Huggies brand of diapers, said it was shuttering Nigerian operations two years after it relaunched a $100 million manufacturing facility in the commercial hub of Lagos.
The company made the “difficult decision” to leave Africa’s most populous nation after almost 15 years of operations due to economic developments in the country and a shift in its strategic priorities globally, according to an emailed statement.
It will also cease manufacturing or marketing Kotex sanitary pads in the economy that was once Africa’s biggest.
Kimberly-Clark restarted operations in 2022 after it announced a similar closure in 2019 following a strategic review of its business.
The closure is the latest in a series of exits by global conglomerates including Procter & Gamble, GSK Plc, Bayer AG and Sanofi SA.
Last year Unilever Plc reduced the products it manufactured in the country.
While recent foreign exchange reforms reduced dollar scarcity that hindered imports of raw materials and repatriation of earnings, the resulting devaluation of the naira inflated costs of operations and the servicing foreign loans for many firms. This is compounded by unreliable electricity supply and congestion at Nigeria’s ports.
Diageo says remains committed to Nigeria
Diageo says it remains deeply committed to Nigeria and will retain ownership of the Guinness brand, which will be licensed to Guinness Nigeria for the long-term, enabling the next phase of growth and development of Guinness Nigeria under the stewardship of Tolaram.
With a five-decade presence in Africa, Tolaram is one of the largest consumer packaged goods companies on the continent and has forged joint venture partnerships with several leading consumer multinational companies.
In partnership with Guinness Nigeria and Tolaram, Diageo will continue to drive the brand and marketing strategy for Guinness in Nigeria, to ensure Diageo’s exceptional capabilities in brand building and innovation continue to drive long-term growth for Guinness in Nigeria.
Following completion of this transaction, Guinness Nigeria will remain listed on the Nigerian Exchange Ltd. and, subject to regulatory approvals, Tolaram intends to launch a mandatory takeover offer in compliance with local law requirements.
Omobola Johnson, Board Chair, Guinness Nigeria, said: “Today’s announcement represents a significant opportunity for the next phase of growth for Guinness Nigeria. This partnership brings together Tolaram’s deep expertise in manufacturing and distribution, and Diageo’s exceptional capabilities in brand building and innovation. I believe this is a winning combination which leaves Guinness Nigeria extremely well placed to drive further growth in this market.”
Adebayo Alli, Managing Director/Chief Executive Officer, Guinness Nigeria, said: “Today’s announcement marks an exciting moment for Guinness Nigeria, our employees and our customers. I look forward to working alongside Tolaram, which is one of the largest and most respected consumer goods companies in Africa, and I am pleased to note Tolaram’s alignment with Guinness Nigeria’s values and its strong commitment to build an enduring and sustainable business”.
Haresh Aswani, Managing Director, Tolaram Africa, said: “We are thrilled to welcome Guinness Nigeria, a company with such a rich legacy and strong consumer loyalty, into our ecosystem. This strategic move will expand our significant footprint in the Nigerian market and presents an opportunity to leverage our combined strengths to foster innovation and deliver immense value to our customers and shareholders across the nation.”
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