The board of directors of UAC of Nigeria Plc has announced that a binding agreement has been signed with Custodian Investment Plc for Custodian to purchase a 51 per cent equity interest in UACN Property Development Company Plc.
The agreement, according to statement obtained from the Nigerian Stock Exchange, marks the beginning of a partnership between Custodian and UAC that will achieve both companies’ respective objectives in the real estate industry.
It also marks a significant milestone aligned with UAC’s strategy to focus on its core businesses.
The deal highlights showed a sale of 9,465,584,668 UPDC ordinary shares held by UAC, representing 51 per cent of UPDC’s issued share capital, to Custodian.
The sale shares will be sold in two tranches: Initial sale of 946,558,467 shares, representing 5.10 per cent of the issued share capital of UPDC, on execution of binding transaction agreements and subsequent sale of 8,519,026,201 shares, representing 45.90 per cent of the issued share capital of UPDC upon receipt of requisite approvals.
Completion of the sale is subject to regulatory approvals from The Nigerian Stock Exchange and the Federal Competition and Consumer Protection Commission.
Commenting on the partnership, Wole Oshin, Group Managing Director of Custodian Investment PLC, said, “We at Custodian are excited about the possibilities arising from this partnership with UAC which provides multiple levers for value creation.
“The rationale for the transaction is that Custodian and UAC share the view that their ambitions for capturing 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 with a track record of profitability and annual dividend distribution which offers a good compliment for our product portfolio.
“We are confident 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.”
Folasope Aiyesimoju, Group Managing Director of UAC, said: “The Transaction is a significant step in achieving our objectives for UPDC. In 2018, the Board and management of UAC embarked on a strategic review to evaluate the performance of the company and its subsidiaries. The objective was to achieve sustainable positive financial performance from our existing operations and enable management focus on businesses that align with our 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 UAC’s portfolio.
“Following its review, the Board concluded that it would be in the best interest of UAC 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 UAC 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 UAC to transfer UAC’s equity interest in UPDC pro-rata to UAC’s shareholders,and plans for UPDC to unbundle the UPDC REIT to its shareholders.
“The N16bn 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, UAC 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 UAC’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.”