Analysts Advise Seven-Up Minority Shareholders to Divest

Investment analysts at Afrinvest West Africa, have advised minority shareholders of Seven-Up Bottling Company Plc to accept the tender offer from the majority shareholder, Affelka S.A to buy them out. Affelka holds 73 per cent of the equity of Seven-Up. The majority shareholder recently informed the investing public of its plan to completely buyout minority shares in 7UP for a consideration of N112.70 per share relative to the market price of N101.97 as at last Friday. While the planned purchase is still subject to approval by the shareholders at a Court-Ordered meeting, the company has received a “No Objection” from the Securities and Exchange Commission (SEC).

However, Afrinvest said given the recent weak financial performance, historical illiquidity characterising Seven-Up’s stock - which will possibly worsen postacquisition - and the premium offered by Affelka relative to the current market price, they are recommending investors tender their shares for the price consideration. The analysts explained that in its latest 2017 full year financial results, Seven-Up’s performance deteriorated on the back of rising direct and indirect cost profiles as well as finance charges despite growing revenue considerably.

The Company recorded a N108.3 billion expansion in revenue and a loss after tax of N10.8 billion.

Similarly, in its half year (H1):2018 interim report, Seven-Up recorded a loss after tax of N3.8 billion. Following the planned acquisition of the ordinary shares of investors, minority investors are faced with the decision to either “Sell” or ‘Hold”. Afrinvest explained that on the consideration of the options, its overall analysis favours a “Sell” decision premised on the illiquidity, weak investor sentiments and premium pricing.

“In the event that the shares of minority shareholders are being bought over, investors who decide to hold would be faced with illiquidity challenge associated with the stock. As such, prices of the stock will remain rather unreflective of fair market pricing, thereby indicating an increasing likelihood of a substantial loss in value of investments,” they said

The analysts added that the share price of Seven-Up has suffered negative investor sentiment on the back of disappointing performance scorecards with a YTD loss of 32.8 per cent as at last Wednesday, underperforming that of the Consumer Goods Index (+37.1 per cent ) and benchmark index (+47.1 per cent).