CORPORATE DEALS, FINANCE & INSOLVENCY

"I think the vote will be positive for the deal. Indeed, with the cross-holdings very few holders will be voting against as that will cost them money." 

Niels Lammerts van Bueren, portfolio manager at Dutch arbitrage fund TRZ Funds on the $70bn Royal Dutch Shell's takeover of BG Group. Investors will be voting separately on the deal at meetings expected next month after the takeover received its final regulatory seal from China this week. 

Earlier this morning I read an announcement by Tiger Brands dated 14 December 2015 and placed on the website of NSE. The notice informed shareholders of Tiger Brands' plan to divest its 65.7% shareholding in Tiger Brands Consumer Goods Plc ("TBCG" - formerly Dangote Flour Mills) to Dangote Industries Limited ("DIL") for a nominal consideration of $1. The 65.7% stake was sold to Tiger Brand by DIL in 2012 for a whopping $200 million! The sale will increase DIL’s stake to 75.7%. I suspect the transaction is structured to avoid stamp duties and other taxes (the actual value of the transaction is N10 billion i.e. $50 million - see below).

Other terms of the deal include:(i) *DIL to provide TBCG with an immediate cash injection of N10 billion;(ii) Tiger Brands will write off its shareholder loans to TBCG;(iii) Tiger Brands will assume and settle outstanding debt guaranteed on behalf of TBCG(iv) The former directors of TBCG (Olakunle Alake, Arnold Ekpe and Asue Ighodalo) will re-join the board of TBCG and be reappointed with effect from 10th December 2015.

A company which is able to pay an undisputed debt and chooses not to do so has only itself to blame if the inference is drawn that it is unable to pay.

EBIT

An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "profit before interest and taxes (PBIT).

EBIT measures the profit a company generates from its operations, making it synonymous with "operating profit." By ignoring tax and interest expenses, it focuses solely on a company's ability to generate earnings from operations, ignoring variables such as the tax burden and capital structure.

This focus makes EBIT an especially useful metric for certain applications. For example, if an investor is thinking of buying a firm out, the existing capital structure is less important than the company's earning potential. Similarly, if an investor is comparing companies in a given industry that operate in different tax environments and have different strategies for financing themselves, tax and interest expenses would distract from the core question: how effectively do these companies generate profits from their operations?

Dawn Raid