The Securities and Exchange Commission (SEC) has approved the establishment of a new share buy-back programme for Dangote Cement Plc.
This was contained in a notice to the Nigerian Exchange Limited (NGX ) as seen by Nairametrics.
According to the corporate disclosure, the programme will expire on 12 December 2023, 12 months from the date of the shareholders’ resolution.
The share buyback programme will be executed under the approval granted by the company’s shareholders at an extraordinary general meeting held on 13 December 2022.
Open market offer: The group noted that the share buyback will be undertaken through an open market offer or self-tender, at such times and on such terms as the Management of the Company may determine, subject to prevailing market conditions.
- “The Company will continue to monitor the evolving business environment and market conditions, in making decisions on tranches of the share buy-back programme,” the statement noted.
What you should know: A share repurchase reduces the total assets of the business so that its return on assets, return on equity, and other metrics improve when compared to not repurchasing shares. Reducing the number of shares means earnings per share (EPS) can grow more quickly as revenue and cash flow increase.
One of the reasons for the share buyback is to increase long-term shareholder value. Also, the exercise is expected to support the cement manufacturer’s continuous capital structure and balance sheet optimisation process. This means that repurchasing shares while improving financing and balance sheets efficiency is expected to reduce the cost of capital and enhance investors’ value.
While some investors prefer cash distributions, others would choose to stay invested in a company. To cater to both, Dangote Cement decided to use a combination of dividends distribution and share buybacks to strike the right balance, while the initiative would help reduce the number of shares outstanding and increases the proportional rights of any single share. This means that the earnings per share (EPS) would be higher due to the share buyback and shareholders that want to remain invested in the company in the long term would benefit from this.
The back story: On December 13, 2022, Dangote Cement’s shareholders authorised the management of the company to undertake a share buyback of up to 10% of its issued shares, effective from the date of the resolution.
The company had earlier indicated an interest in undergoing a share buyback programme, in respect of up to 10 per cent of its issued shares, to improve the company’s return on equity and its shareholders’ value, to facilitate the future long-term growth of the company.
The approval through voting, which was given at the company’s Extraordinary General Meeting, held in Lagos recorded 100% approval from the shareholders, with many of them describing the exercise as very laudable and a win-win situation for them.
Among other resolutions, the shareholders authorised that the Memorandum and Articles of Association of the company be amended (as applicable), upon completion of the share buyback, to reflect the company’s share capital, following the cancellation (if any) of the shares acquired and/or otherwise held by the company.
On December 21, 2020, the first tranche, ‘Tranche I’ of the share buy-back programme, was announced. The programme commenced on December 30 2020 and was completed on December 31.
Furthermore, in January 2022 the Company completed the second tranche of its buy-back programme. Dangote Cement has now repurchased 0.98 per cent of its outstanding shares. This share buy-back programme reflects the Company’s unwavering commitment to creating value and identifying opportunities to return cash to shareholders.