Flour Mills of Nigeria (FMN), shareholders at risk as supreme court dismisses appeal court ruling against Ecobank over N5.5 billion debt dispute.
BrandSpur Nigeria recalls that Flour Mills acquired a major share in Honeywell through its companies, Ecowise Horizon Investment Limited and Creywise Investment Solution Limited in April 2022.
Honeywell and its sister firms, Anchorage Leisures Ltd and Siloam Global Ltd, have been locked in a N5.5 billion debt dispute with Ecobank.
While Honeywell, Anchorage, and Siloam claimed to have paid N3.5 billion as final payment for the debt, Ecobank insisted the firms were still indebted to it.
Supreme Court Verdict
BrandSpur Nigeria understands that the Federal High Court and the Appeal Court had backed Honeywell’s position, however, the Supreme Court yesterday, Friday, 27th January 2023 ruled against the two lower courts, stating that Honeywell is still indebted to Ecobank.
Delivering its judgment on the substantive issues in the case on Friday, a five-member panel of the Supreme Court led by Tijjani Abubakar, said Honeywell, Anchorage, and Siloam were indebted to Ecobank.
But the court held that the firms’ appeal succeeded in part, declaring that they were right to commence their suit at the Federal High Court in Lagos.
In the lead judgment delivered by Emmanuel Agim, the Supreme Court also held that the Court of Appeal was wrong to have held that the trial court lacked jurisdiction to have heard Honeywell’s case.
Justice Emmanuel Agim said, “I affirm the judgment of the Court of Appeal, setting aside the decision of the Federal High Court, granting the reliefs claimed for by the appellants (Honeywell).
“I hold that the appellants’ claim at the trial court fails and it is hereby dismissed,” adding that, “The appellants shall pay the cost of N1 million to the respondent (Ecobank).”
Ecobank’s Initial Warning
Brand Spur Nigeria recalls that Ecobank warned Honeywell Group from proceeding with the sale of Honeywell Flour Mills to Flour Mills of Nigeria.
Part of the statement reads thus, “Consequently, we hereby demand that Flour Mills of Nigeria Plc, in its best corporate interest, immediately cease and desist from consummating the subject transaction, which aims to divest the assets of a company being wound up (Honeywell Group Limited).
“Please be further informed that the assets of both Honeywell Group Limited and Honeywell Flour Mills Plc. are the subject of the winding-up action and thus based on the doctrine of “lis-pendens” (in addition to the provisions of CAMA supplied above) you are advised to refrain from dealing with the subject asset which forms part of the subject matter of litigation.”
Debt Concerns For Flour Mills
A year before the acquisition, the central bank directed First Bank to sell its stake in Honeywell, which is valued at N1.35 billion. The stake was eventually sold to Flour Mills.
While the exact debt to First Bank is unknown, about N13.5 billion was stated as loan obtained by Honeywell from FBN. In order to repay the loan following CBN’s threat, Honeywell was forced to issue a corporate bond in March 2021.
Meanwhile, excluding the Ecobank loan which has been upheld by the Supreme Court, Ripples Nigeria learnt that Honeywell has a N67.02 billion loan (as of September 30, 2022) to finance at different maturity dates
This means that Flour Mills took on an N67.02 billion loan due to the acquisition of Honeywell, and coupled with the recent Supreme Court decision, the debt burden of Honeywell on Flour Mills continues to eat into its revenue. The loan is 87.6 per cent of the company’s turnover in the same period.