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  • Business - Companies
  • Updated: August 04, 2020

How Custodian's Acquisition Of UPDC's Majority Stake Benefit All Companies

How Custodian's Acquisition Of UPDC's Majority Stake Benefit

Custodian Investment Plc has agreed to acquire majority stake in UACN Property Development Company Plc (UPDC). Custodian disclosed the acquisition process following a signed agreement between the insurance company and UAC Nigeria Plc (UACN). Custodian is making an inroad into the real estate market to expand its portfolio.

The deal will see Custodian acquire 51 percent equity interest in UPDC, which is a property company, and will become a standalone business, exiting UACN, once the deal has been approved by relevant regulatory bodies, the Nigerian Stock Exchange (NSE) and the Federal Competition and Consumer Protection Commission (FCCPC).

How The Deal Will Be Done?

In total, 9,465,584,668 UPDC ordinary shares which UAC holds, will be sold to Custodian - this represent 51% of UPDC’s issued share capital. However, the transfer of shares will be done in two tranches; the first phase will be a 5.10% stake, which represent 946,558,467 shares, will be transferred to Custodian following the binding transaction agreements between both companies.

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The second phase, which is 45.90% (8,519,026,201 shares) will be passed to Custodian once necessary approvals have been received, this was made known in a statement seen by AllNews.

Benefits Of The Deal To Custodian

(1). Attractive valuations relative to replacement cost and market values: UPDC and UPDC REIT trade at attractive valuations relative to the market values of their underlying assets.

(2). Recurring cash flows visibility: The UPDC REIT is highly cash-generative with recurring income streams. It has distributed an average of N1.4billion p.a. over the last five years. Rental income from UPDC REIT is underpinned by leases with first-tier tenants. This presents a good match for our business.

(3). UPDC hasN10 billion of assets for sale which the management team will focus on realising to provide shareholders with liquidity.

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(4). Leveraging more than two decades of UPDC’s strong track record as a leading developer to drive its core property development business.

(5). A profitable and scalable facilities management business.

Benefit Of The Deal To UAC

(1). Deconsolidation of a business (UPDC) that has a different cashflow profile and capital needs from the rest of UAC’s portfolio.Upon completion of the sale, UPDC will cease to be a subsidiary of UAC and will operate as a standalone entity, separate from UAC.

(2). Increased management focus on businesses in sectors that align with UAC's core strategy

(3). HavingCustodianasa strong anchor shareholder inUPDC strengthens UPDC strategically.

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