Shareholders Of Standard Alliance Insurance Are Battling The Company Over Controversial Disposal Of 2.2 Billion Treasury Shares Worth N18.79 Billion
Aggrieved shareholders of Standard Alliance Insurance Plc, a company quoted on the Nigerian Stock Exchange (NSE), have risen against the Board and Management of the organization over the disposal of the company’s2.21 billion Treasury Shares worth N18.73 billion. Treasury shares are (unsubscribed, reserved) shares warehoused by a company pending when the company would secure interested investors to acquire them.
The shareholders who expressed outrage over the process adopted in disposing of the shares, argued that the deal was lacking in transparency and that the shareholders were short-changed and not involved. They have, therefore, vowed to battle the company’s leadership to any extent possible.
Trouble began when some shareholders raised the matter and confronted the Board of Directors at the company’s Annual General Meeting (AGM) in Lagos last September. According to the aggrieved shareholders, the Board was not truthful about the transaction. They also argued that the deal was sealed in a manner that lacked the transparency required of a publicly quoted company. The UNION leant that some shareholders had aligned with the company’s leadership as they claimed that the Board acted in the interest of the company. The aggrieved shareholders, however, maintained that the action of the Board lacked transparency and should be treated for what it is — corporate fraud.
The Board had informed the shareholders that the company had secured the interested of an investor, Gemrock Management Company Limited, in acquiring the warehoused Treasury Shares at a combined par value and premium price of N8.73 billion. Par value is the book value of a share, while the actual market value is referred to as premium.
The Board had approached the shareholders with a request to approve the deal. The Board also informed the shareholders that it had initiated the necessary statutory processes to secure the approval of the regulatory authorities in order to consummate the deal. The company therefore requested the shareholders to give their consent, a matter that featured under ‘Special Business’ and ‘Acquisition of own shares’ in the order of business of the AGM:
“Acquisition of own shares
By virtue of the existence of treasury shares per these financial statements arising from the issue of shares that did not result in net cash in flow to the company during its public offer of 2008, the Company ha ssecured an investor Gemrock Management Company Limited who acquired the Treasury shares of2,212,046,824 units ordinary shares valued at N8,737,585,955 (par value ofN1,106,024,412 and premium of N7,631,561,543) as at 31December 2014. The transaction is however subject to obtaining all regulatory approval which is ongoing.”
The UNION learnt that this matter triggered an uproar that threw the proceedings of the AGM into a rowdy session – resulting in an atmosphere of confusion and disorderliness. It was also learnt that the aggrieved shareholders stood their ground of opposing the action of the company’s leadership as they accused the Board members of acting in bad faith and embarking on a deal that helped them feather their own nests.
The aggrieved shareholders explained that it was less than transparent for the Board to ask the shareholders to approve a deal they had already sealed based on which the new investors had been appointed to the Board without carrying the shareholders along. They also argued that the price at which the Treasury Shares were disposed of ought to have been communicated to the shareholders prior. “Treasury Shares worth N8 billion were reported sold and were waiting for approvals of Regulators in the Annual Report and Accounts 2014. But the Board was just asking the shareholders to approve at AGM recently, after they had sold the shares, awaiting approval. Even, the buyers have been appointed to the Board. It is a fraud,” Olufemi Timothy, President, Renaissance Shareholders Association of Nigeria, told The UNION weekend.
Capital Market analyst, Norna Aworh, who is known for his vocal stance on the performance of quoted companies, said the wrong-doing of Standard Alliance Insurance Board goes beyond the orbit of not carrying shareholders along in disposing of the Treasury Shares. Aworh told this newspaper weekend that the Board had sold the Treasury Shares long before the disclosure. He maintained that the shares had long been sold and the beneficiaries had been collecting dividend, whereas the shareholders were told that no investor had shown interest in acquiring the shares.
You cannot say you have an offer, and you have collected money.
However, National President, Constance Shareholders Association of Nigeria, Shehu Mallam Mikail, dismissed the agitation of the aggrieved shareholders as nothing to give attention to. “It is a non-issue”, Shehu told The UNION, adding that the Board should be commended for securing investors to acquire the warehoused shares, as the company needs money to fund its operations. He argued that the Board need not consult the shareholders before disposing of the shares.
This argument was amplified by Boniface Okezie, President, Progressive Shareholders Association of Nigeria (PSAN), who lambasted the aggrieved shareholders for playing to the gallery. In a telephone chat with The UNION, Okezie recalled that the Treasury Shares had been ‘floating’ for about 3 years without attracting investors. The Board, as representatives of the shareholders, had the responsibility of scouting for investors that would bring money to run the company and that is what they have done, the PSAN president maintained.
According to Okezie, an approval, by way of Resolution, had earlier been given to the Board to dispose of the shares some years back. The same approval subsisted until the investors came. “Which is better: to keep the shares or to sell them and use the proceeds to run the company? Remember that the insurance sector is not so attractive and going to the Exchange to raise funds either by private placement or by rights issue, or even by initial offers is not feasible at this time.”
He further said, “The company has to recapitalize. Are those opposing it bringing money? There was AGM and a Resolution was passed to that effect. Do they want the company to die? What the (aggrieved) shareholders ought to agitate for is to be made to benefit from the deal by reserving some portion of the shares for existing shareholders. What they should have insisted on would have been for Management to undertake to allow some portion of the shares to be sold to existing shareholders at the same price,” Okezie explained.
Asked why the Management did not tow that line, Okezie confirmed that it was later pointed out to them and that the insurance company had accepted to implement it, so that other shareholders can benefit from the deal. “People go to AGM to make noise without understanding what is being said; if the survival of the company is paramount to you, you should not go there to make noise and to disrupt the good process being put in place by Management. People should not go to AGM to kill the company.”
Timothy, however, insists that disguising over the wrong-doing of the Directors is a sign of poor knowledge of the Capital Market because no niceties can cover a fraud.Aworh had also argued along that line: “You cannot say you have had an offer and that you have collected money, and you put the money in the company accounts and for two, three years down the line you collected dividend on it. After you have collected the dividend, you turn round to say, the offer was not successful. It is all fraud. We are ready to get to the bottom of the matter.”
Okezie further explained that it is the Board that fix price; not shareholders. He argued that after a resolution had been passed on the Standard Alliance Insurance Treasury Shares, the Board went back and fixed the price. “The Board only implemented a Resolution that had been passed in previous years. What the Board did was to ensure the survival of the company so that the shareholders will not lose their investment. They have not done anything wrong,” Okezie insists.
Stockbroker and Capital Market analyst, Sola Oni, said that lack of adequate communication must have led to the perceived procedural breach. He said that an Emergency General Meeting (EGM) ought to have been convened to make assurance doubly sure. That way all grey areas are tackled and nothing is left to chance.
The UNION learnt that the company’s last AGM was inconclusive, according to Timothy and Aworh; but Okezie denied the claim. He said the meeting was properly concluded, “the noise notwithstanding.”
Nelson Egboboh, Head, Group Corporate Communications, Standard Alliance Insurance, did not respond to several phone calls and text messages put through to his mobile phone. Securities and Exchange Commission, SEC, and the Nigerian Stock Exchange, NSE, did not respond to enquiries sent to them.
The apex insurance regulatory body, National Insurance Commission, NAICOM,however, told The UNIONthat it had commenced investigation into the matter. NICOM’s spokesperson, Razaq Salami, confirmed that the management of Standard Alliance Insurance was invited to appear before the Commission’s Technical Committee last Tuesday December 8, in Abuja. Salami confirmed weekend that the insurance company’s management complied and that the Committee was compiling its report to be submitted to NAICOM management. He did not give details.
– Sam Diala and Anurika Nwachukwu