Fakoyejo OlalekanShareholders of Glaxo SmilthKline (GSK) Consumer Nigeria saw their investments in the pharmaceutical company increase by 20.27 per cent after the firm announced its plan to cease operation.
GSK Nigeria closed on Thursday that the healthcare company will shut down its operation after its parent company and manufacturer of its vaccines and medicines, GSK UK, decided to terminate their business relationship.
GSK UK chose to deal with another local company for the distribution of its products in Nigeria, a move that will send GSK Nigeria out of the market, as the latter doesn’t produce its own drugs.
The UK company, prior to the termination of its contract with GSK Nigeria, owns 46.4 per cent held through Setfirst Limited and Smithkline Beecham Limited, while Nigerian shareholders own the remaining 53.6 per cent.
After the announcement, Prime Business Africa gathered from trading data that the shares of GSK Nigeria became the sixth most sought-after shares in the Nigerian stock market at the end of trading last week.
GSK Nigeria’s stock price, which had not recorded any movement since July 28, 2023, when it closed at N7.40 kobo, surged to N8.10 kobo on Thursday, the same day the announcement was made.
At the close of Friday’s trading, the share price of GSK Nigeria hit a peak of N8.90 kobo, the highest since July 2019.
The hike in GSK Nigeria’s share price increased the shareholders’ investments by 20.27 per cent, representing N956.7 million gain, according to PBA analysis.
Why the rush for GSK Nigeria shares?
The rise in demand for GSK Nigeria shares comes ahead of the impending exit package or distribution of retained earnings to shareholders before the company shuts down.
The retained earnings of GSK Nigeria, as of June 2023, is N8.56 billion, and it is often used to invest in the firm and also distribute wealth to the shareholders.
However, with GSK Nigeria going out of business, using the money as an investment is no longer on the table, leaving the company with an option to distribute the funds to stakeholders.
While the exit package is linked to the factor driving GSK Nigeria’s share price up, the value of the exit package is unknown, however, recall that GSK Nigeria paid its shareholders N0.55 kobo per share or N657.73 million from the retained earnings as dividend for 2022 period.
Prime Business Africa had reported that GSK Nigeria disclosed in a statement released on Thursday that: “The Board is conscious that shareholders will have many questions; we have been working assiduously with our professional advisors to agree on next steps and we will be shortly submitting to the Securities and Exchange Commission (“SEC”) a draft Scheme of Arrangement which may, if approved, see shareholders other than GSK UK, receive an accelerated cash distribution and return of capital.
“The Board acknowledges the support of the GSK Group in its intentions to make this possible, full details of which we hope to publish shortly. In the meantime, however, we cannot give you assurance of the final terms of any scheme, or that any scheme will be approved by the SEC or by shareholders.
“Shareholders are advised to seek professional advice and continue to exercise caution when dealing in the company’s shares until a further announcement is made.”
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