Ecobank warns Flour Mills Nig Plc against proceeding with Honeywell acquisition
….both companies have a history of court cases.
Ecobank Nigeria Limited has advised Flour Mills of Nigeria Plc against the proposed acquisition of equity stake in Honeywell Flour Mills Plc.
The bank alleged that Honeywell Group Limited, the parent firm, had not been servicing its loans with the bank, according to Punch.
In a letter addressed to the Managing Director of Flour Mills of Nigeria and signed by solicitors to Ecobank, Kunle Ogunba and Associates, the company, as well as the public and corporate bodies were warned of the “danger inherent in dealing in any shares of the company.”
The bank alleged that it had advanced several loan facilities to Honeywell Flour Mills, including working capital disbursements. Further stating that as a result of the failure of the company to liquidate its loan facilities, it 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.
The letter said, “However, while the said action was dismissed at the Federal High Court and the Court of Appeal, it is pertinent to state that an appeal with appeal no: SC/700/2019 has been filed challenging the said decision at the Supreme Court (Notice of Appeal is herein enclosed and marked as Annexure C).
“Hence, the effect of the above is that there is currently a winding-up action/proceeding pending against the said Honeywell Group Limited.”
The bank quoted a provision of Section 577 of the Companies and Allied Matters Act 2020 as saying, “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…”
According to the bank, this restricts Honeywell Group from moving ahead with the sale of Honeywell Flour Mills to Flour Mills of Nigeria.
“Consequently, we hereby demand that Flour Mills of Nigeria Plc, in its best corporate interest, immediately cease and desist from consummating the subject transaction, which aims to divest the assets of a company being wound up (Honeywell Group Limited).
“Please be further informed that the assets of both Honeywell Group Limited and Honeywell Flour Mills Plc. are the subject of the winding-up action and thus based on the doctrine of “lis-pendens” (in addition to the provisions of CAMA supplied above) you are advised to refrain from dealing with the subject asset which forms part of the subject matter of litigation,” the bank added.
Both companies have been in a long-standing legal battle since 2015 over an unpaid debt of N5.5 billion by the latter. While Ecobank is maintaining that Honeywell is indebted to it to the tune of the aforementioned money, out of which N3.5 billion had been paid, Honeywell claimed to have paid the debt in full.
In the wake of the legal tussle, Dr. Oba Otudeko, Honeywell Group chairman, had told a Court of Appeal that the sum was owed to individual companies. These companies include Anchorage Leisures Limited, Siloam Limited, and Honeywell Flour Mills Plc.
Otudeko maintained that his companies had paid N3.5 billion as of December 12, 2013, as the full and final payment for the N5.5 billion debt as agreed by the parties at a July 22, 2013 meeting.
Flour Mills of Nigeria (FMN) and Honeywell Group Limited (HGL) announced that they have signed an agreement to which Flour Mills will acquire Honeywell Group’s portfolio company, Honeywell Flour Mills PLC (HFMP).
Report indicated that currently, both companies owe about N220 billion in external loans per their 2021 half-year results. Honeywell currently has a debt balance of N78.5 billion while Flour Mills is also debt-laden with about N142.8 billion in debt.
According to Stanbic Research, the management team of Flour Mills Nigeria Plc plan to fund the deal through cash and debt Funding.