Ecobank warns buyers on Honeywell Flour over huge debt

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Uba Group

Ecobank Nigeria Limited has placed a Caveat over the move by Flour Mills Nigeria PLC to acquire 71.69 percent of Honeywell Group Limited.

In a statement on Tuesday, the bank said the company is hugely indebted to it and that the debt is currently a subject of litigation.

Kunle Ogunba & Associates, Ecobank’s lawyer said consequent upon a press release circulated in several online publications, the bank decided to alert the general public and the corporate bodies on the danger inherent in dealing in any shares of the company.

Ecobank, while narrating its interest in the company, said it advanced several loan facilities which includes working capital disbursements to Honeywell Flour Mills Plc and that due to the failure of the company to liquidate the said loan facilities, Ecobank was constrained to commence winding up proceedings against Honeywell Group Limited at the Federal High Court, Lagos in suit no: FHC/L/CP/1571/2015;

Ecobank said Honeywell Group Limited, being Respondent to the winding up petition, objected to the jurisdiction of the trial court to preside over the said suit, this the bank said was upheld by the trial Court,

Aggrieved with the decision of the trial Court, Ecobank said it filed an appeal (with appeal No: CA/L/1041/2016) at the Court of Appeal, Lagos Division and that upon review of Ecobank’s case, the appellate court found merit in the appeal, and held that the winding up proceedings against Honeywell Group Limited was properly commenced and that the Federal High Court had jurisdiction to hear the said petition.

Ecobank said that while the said decision of the Court of Appeal has been appealed to the Supreme Court, the Court of Appeal’s judgment remains valid and subsisting till date.

The bank stated that the effect of the Appeal Court judgment is that there is currently a winding-up action/proceeding pending against the said Honeywell Group Limited.

Ecobank added that the provisions of Section 577 of the Companies and Allied Matters Act 2020 “CAMA” : “Where a company is being wound up by the Court, any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up is void”

The bank said the estate or effects of Honeywell Group Limited includes (but is not limited to) its 71.69% stake in Honeywell Flour Mills Plc which it now seeks to divest to Flour Mills contrary to the express provisions of the law which prohibits the said sale/transfer or divestment during the course of the winding up proceedings.

It added that it is clear that Honeywell Group Limited is legally “stopped from sequestering and/or disposing any of its assets pending the final determination of the winding up action commenced against it”.

The bank said that while it believes that Flour Mills or any other interested person or group will adhere to its wise counsel and comply with its demands as a responsible and publicly listed entity, it shall not hesitate to deploy all available legal options to prevent this “audacious illegality from coming to fruition”.

Oba Otudeko, chairman, Honeywell Flour Mills Plc, had announced plans to sell his indirect stake in the company to Flour Mills of Nigeria as the latter moves to acquire the manufacturer from major shareholders.

Otudeko owns 74.56 percent stake in Honeywell through his investment firm, Siloam Global Services Limited, but said he would be selling 71.69 percent to reduce his exposure in the flour market.

The stake is valued at N80 billion according to FMN, but when HFMP’s share is pegged to current market price, it cost around N20.04 billion, which means a gain of N60 billion to Otudeko.

FMN, owned by Greek-American billionaire, John G. Coumantaros, will also buyout First Bank Nigeria Holdings, which is the second largest stakeholder with about 5 percent.

According to a statement released to the capital market on Monday, FMN disclosed that, “Given FMN’s parallel negotiations for both stakes culminating in the agreements being signed on the same date, the basis for arriving at key commercial terms including final equity price per share, will be the same.

“The price payable to FBN Holdings will be the same with HGL’s.” the statement read, but current market price values FBN Holdings buyout fee at N1.35 billion [but terms will be different upon completion].

It’s not yet known if the acquisition will lead to a change of name by Honeywell, as seen in the acquisition of Portland Paint by CAP, and that of Access Bank acquiring Diamond Bank.

Both flour brands compete in various food markets through Golden Penny products and Honeywell.