Custodian Investment to Acquire 9.5bn Shares in UACN Property Company

The management of UAC of Nigeria Plc on Monday announced that they have entered into a binding agreement with Custodian Investment Plc for Custodian to acquire a 51 percent equity interest in UACN Property Development Company Plc (UPDC) from UAC.

In the statement released by the UAC of Nigeria on the Nigerian Stock Exchange, the company said Custodian will acquire 9,465,584,668 UPDC ordinary shares held by UAC, representing 51 percent of UPDC’s issued share capital.

The company further stated that the sale of shares will be done in two tranches.

The first phase includes an initial sale of 946,558,467 shares, representing 5.10 percent of the issued capital of UPDC, on the execution of binding transaction agreements.

This will be followed by a sale of 8,519,026,201 shares, representing 45.90 percent of the issued share cpaital of UPDC upon receipt of requisite approvals.

According to UAC, the agreement marks the start of a new partnership between Custodian and UAC that will achieve both companies’ objectives in the real estate sector. It also marks a significant milestone aligned with UAC’s strategy to focus on its core businesses.

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 (“UPDC REIT”) 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.”

Also, commenting on the deal was Folasope Aiyesimoju, Group Managing Director of UAC, Aiyesimoju 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 (“UPDC Unbundling”), and plans for UPDC to unbundle the UPDC REIT to its shareholders (“UPDC REIT Unbundling”). The ₦16 billion 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.”