SEC wakes up, intervenes in GSK Deal

Apparently waking up to its responsibility in protecting minority investors and sending  a strong signal  to multinationals, the Securities and Exchange Commission (SEC) may have barred  GlaxoSmithKline United Kingdom (GSK UK) from voting during court-ordered general meeting   tomorrow to consider its proposal to raise its stake from 46.4 per cent to 75 per cent in Glaxosmithkline Consumer Nigeria Plc.
Besides, the regulator of the Nigerian capital market has fixed the share price for the deal at a minimum of N60 per share, compared with the N48 initially approved.

GSK UK had last November come up with the proposal through a scheme of arrangement, which the board of GSK Nigeria accepted.
According to a letter by the Chairman of GSK Nigeria, Chief Olusegun Osunkeye, to the shareholders,  GSK UK wanted to  invest more in  its Nigerian subsidiary but that investment would only come after increasing its holding to 75 per cent.
However, minority shareholders have opposed the move, saying it is a ploy to alienate them  and delist the company from the Nigerian Stock Exchange (NSE) sometime in the future just like the way Coca Cola Hellenic Bottling Company S.A. used its controlling stake in Nigerian Bottling Company (NBC) Plc to delist last year.
But as the shareholders of the GSK Nigeria prepare for the court-ordered meeting tomorrow, it was reliably gathered that SEC has barred GSK UK from voting at the meeting, the only way the deal would have  easily scaled through.
It was also gathered that the commission has directed that GSK UK should pay a price not less than N60 for each share if they insist on buying out the Nigerian minority shareholders. Market sources said a letter to that effect has already been written by commission to GSK and its advisers.
The shares, which rose to N68 this year, have been sliding due to resistant to the deal. It closed at N55 per share last Friday.
Explaining the benefits of the deal to shareholders, Osunkeye had said  it would enable GSK UK to provide the support required by GSK Nigeria's expansion and capital improvement plans.

'It will facilitate development of GSK Nigeria's product portfolio and reinforcement  of GSK UK's long term commitment to the GSK Nigeria as one of the leading manufacturing companies in Nigeria,' he said.
But apart from condemnation from minority shareholders, who said they were being short changed, Financial Times (FT) of  London,  last Friday noted GSK UK would not have gone through  with the deal under UK takeover rules.
'The deal is important for GSK, which wants to take greater control of international subsidiaries. The sums are also small. GSK Nigeria has a market capitalisation of $320million; increasing its stake should cost no more than $100million. Which is where GSK's problems start. One complaint is that GSK is wrapping the transaction up too neatly by voting its stake in favour - something it could not do under UK takeover rules. That may be a bit unfair,' FT said in an article.
The paper noted that GSK Nigeria's board had secured a poor deal for minority shareholders.
'It (GSK Nigeria board) clearly caved in too quickly when big brother in London came calling. This deal should be a template for the treatment of minority investors. It is not too late for the GSK Nigeria board to stand up and be counted,' FT declared. Thisday