British multinational Diageo will give EABL shareholders who were on the brewer’s books by January 16 and early bidders the first priority in its plan to purchase an additional 14.97 percent stake in the local subsidiary.
The priority treatment will kick in if there is an oversubscription in the offer, which opened on Monday to run until March 17, with a pool of 47.5 million shares designated towards a guaranteed allocation of up to 10,000 shares for all bidders in the first phase of the sale.
In the second phase, which runs between February 27 and March 17, an additional 55 million shares will be used to satisfy bidders who missed out on their full allocation in the first phase, with the balance being to cover the remaining bids.
Diageo is buying an additional 118.4 million shares in EABL at a price of Sh192 per unit, with the offer open to all holders of unencumbered shares of the brewer.
“In the event that the tender offer is oversubscribed, and the guaranteed allocation pool is insufficient to satisfy each accepting shareholder’s first 10,000 ordinary shares, then preference to the guaranteed allocation pool will be given to shareholders appearing on the register on the record date, whether or not such shareholder is an early acceptance shareholder or a final acceptance shareholder,” said Diageo in the tender document.
“Of the remaining 70.89 million ordinary shares that are the subject of the tender offer, up to 55 million shares will be designated the 'early acceptance pool' to be allocated in priority to early acceptance shareholders.”
The move by the company to prioritise early bidders is meant to encourage uptake of the offer, and also reward existing shareholders who now stand the chance to make a significant capital gain on their stock.
The Sh192 offer price represents a premium of 39 percent on EABL’s share price of Sh138 on the last day of trading before Diageo disclosed its offer on October 14, 2022.
In the subsequent three-and-a-half months, the share has appreciated in price to close at Sh177.25 on Monday.
“The early acceptance shareholders will enjoy the benefit of having their shares included in the larger pool allocated for the first closing, and should the tender offer be oversubscribed, be likely to be able to sell a greater proportion of their shares than those shareholders who only apply later before the second closing,” said Diageo.
Diageo added that those making offers to sell their shares will remain eligible for EABL’s interim dividend of Sh3.75 per share for the half year ended December, so long as they are on the brewer’s books by the register closure date of February 16.
This is because the settlement and transfer of the sold shares will be done in April.