Custodian Investment Plc has completed the acquisition of the 51 per cent majority equity stake in UACN Property Development Company (UPDC) Plc from UAC of Nigeria (UACN) Plc.
Custodian Investment and UACN had signed a binding agreement on the divestment of UACN’s 51 per cent majority equity stake in UPDC to Custodian Investment. The transaction included the sale of 9.47 billion ordinary shares of UPDC held by UACN, representing 51 per cent of UPDC’s issued share capital to Custodian.
Under the agreement, the shares sale will be transferred in two tranches with the initial sale of 946.56 million shares, representing 5.10 per cent of the issued share capital of UPDC, on the execution of binding transaction agreements. Then, the subsequent sale of 8.52 billion shares, representing 45.90 per cent of the issued share capital of UPDC upon receipt of requisite approvals.
Regulatory documents indicated that the second tranche of 8.52 billion ordinary shares of 50 kobo each, representing 45.90 per cent, had been transferred to Custodian Investment, concluding the 51 per cent divestment deal.
UACN had earlier in the first tranche transferred 946.56 million ordinary shares of 50 kobo each or 5.10 per cent equity stake to Custodian Investment.
The cross deals for the transfers were done as off-market deals through the negotiated trade window of the Nigerian Stock Exchange (NSE).
The transfer placed the divestment on a fast-track and market analysts expected the divestment to be concluded within this year.
Both parties to the transaction had commended the partnership between Custodian and UACN, noting that the deal would achieve both companies’ respective objectives in the real estate industry. It was also described as a significant milestone that aligned with UACN’s strategy to focus on its core businesses.
Group Managing Director, Custodian Investment, Wole Oshin, said Custodian was excited about the possibilities arising from the partnership with UAC which provides multiple levers for value creation.
He said the rationale for the transaction was that Custodian and UAC share the view that their ambitions for capturing the opportunity in the real estate industry will be better achieved working in partnership.
“UPDC is one of Nigeria’s leading real estate development companies, having completed several landmark residential and commercial developments over the past twenty years. This transaction will provide Custodian with a platform to capture arising real estate opportunities. It also immediately provides recurring cash flow visibility and attractive yields as a result of its direct exposure to Nigeria’s leading real estate investment trust (UPDC REIT) with a track record of profitability and annual dividend distribution which offers a good compliment for our product portfolio,” Oshin said.
He expressed confidence that the recent recapitalisation of UPDC, significant reduction in finance costs, and recently reconstituted leadership have repositioned the company to operate sustainably and capture growth opportunities aimed at increasing stakeholder value going forward.
Group Managing Director, UAC of Nigeria (UACN) Plc, Folasope Aiyesimoju, said the transaction was a significant step in achieving the group’s objectives for UPDC, noting that in 2018, the board and management of UACN embarked on a strategic review to evaluate the performance of the company and its subsidiaries.
According to him, UACN’s objective was to achieve sustainable positive financial performance from existing operations and enable management focus on businesses that align with its strategy. In reviewing UPDC, the board weighed the long-term opportunities in the Nigerian real estate sector against the fundamental differences between the cash flow profile and capital needs of UPDC and those of the other entities in UACN’s portfolio. Following its review, the board concluded that it would be in the best interest of UACN to exit its interest in the real estate sector, allowing UPDC to operate as a standalone legal entity, free to source appropriately structured capital and to unlock value for its shareholders.
In September 2019, the boards of directors of UACN and UPDC jointly announced three significant strategic initiatives aimed at strengthening UPDC and positioning the company to operate as a standalone entity. This included a rights issue to recapitalise the business, plans for UACN to transfer UACN’s equity interest in UPDC pro-rata to UAC’s shareholders (UPDC unbundling), and plans for UPDC to unbundle the UPDC REIT to its shareholders (UPDC REIT unbundling). The N16 billion UPDC rights issue was successfully completed in April 2020, proceeds of which were used to reduce borrowing costs and significantly improve UPDC’s capital position.
“In the process of progressing the unbundling initiatives, UACN received a credible offer from Custodian. The terms of the offer compelled the board to re-evaluate the planned approach to deconsolidate UPDC and influenced the board’s decision to proceed with the sale of a portion of UACN’s interest in UPDC to Custodian, effectively putting an end to the UPDC unbundling. We are delighted about the positive impact that a strong anchor shareholder like Custodian will have on UPDC and are focused on ensuring a smooth transition,” Aiyesimoju said.