Champion Breweries Plc is looking to increase debt in the short term to help fund expansion, ahead of an acquisition that could boost revenues, however execution is vital.
Analysts say a successful acquisition would improve the company’s competitive position and diversification, as well as drive stronger earnings and cash flows.
However, the new proposed debt combined with any potential misalignment between the timing of acquisition and bond issue, could elevate refinancing and liquidity risks.
In August 2025, Champion Breweries announced the acquisition of the Bullet Brand of beverages from Sun Mark Limited.
The acquisition will be effected through a special purpose vehicle (SPV), whereby Champion Breweries will own 80% and the current shareholder will retain a minority interest.
The Bullet Brand is well-recognised and present in 14 African countries including Nigeria, Ghana, Ivory Coast, and Tanzania, with a strong earnings track record.
In contrast, Champion Breweries currently operates on a much smaller scale with limited product range and geographical spread.
The acquisition is expected to materially scale Champion Breweries’ operations, support operational efficiencies through its existing manufacturing facilities and enhance foreign exchange inflows, underpinning a stronger business profile.
Consolidated projections also indicate a positive earnings trajectory, whereby revenue could spike to around N90 billion by 2026, compared to N20.9 billion in 2024, at a higher operating margin of 15% (2024: 10%).
The company however faces a higher risk funding profile as Champion Breweries raised a combined N15 billion ($9.8 million) in July 2025, through the issuance of two series of commercial paper, above the initial plan of N5 billion.
The beverage maker plans to use the funding to meet much higher seasonal inventory requirements in the second half of the year.
Consequently, gross debt increased to N16.7 billion as of July 2025, from only N208 million in December 2024.
The company is in the process of registering a N45 billion Bond Programme with the Securities and Exchange Commission under which it plans to raise further debt of N30 billion.
The bond has a tenor of five years, and the net proceeds would be utilised to fund capital expansion, upgrades and refinance the existing commercial paper.
“Although some of this debt is likely to be repaid through the unwinding of working capital before financial year-end, gearing metrics will be weaker than the very low historical levels. In addition, an unsuccessful or undersubscribed equity offer could necessitate further recourse to debt funding to support the planned acquisition, placing downward pressure on leverage metrics and heightening liquidity risks,” analysts at GCR Ratings said.
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