Dangote Cement Plc is planning a buyback of the company’s shares next week to boost shareholder value.
According to Bloomberg News, the company will repurchase as much as 10 per cent of the issued capital, starting with a first tranche of 85.2 million shares of 50 kobo each, or 0.5 per cent of the total in issue, it said in a filing to the Nigerian Stock Exchange (NSE) on Monday.
The company said the purchase would be done in the open market on December 30 and end the following day or when the entire target number of shares had been repurchased, whichever is earlier, it said.
Dangote said it obtained the approval of shareholders in January to repurchase some of its shares within a year or at an amended time frame for the purpose of increasing the long term value of the stock.
It is Nigeria’s first company to undertake the exercise as previous attempts failed due to suspicion by regulators and investors that the process may be abused.
The cement maker had cash and cash equivalent of N176.7bn ($449.9m) on its books as of September, its third quarter financial statement showed.
The buyback “reflects that the management believes in the valuation and prospects of the company,” Head of Research at Lagos-based Afrinvest West Africa, Abiodun Keripe, said by phone.
“Other companies can follow suit, especially for some of those that have a high number of liquid shares outstanding and have been unable to command a very decent valuation,” he said.
The securities being bought back would be held as treasury shares and may be canceled subsequently, the company said.
Dangote shares rose by 10 per cent to 230.40 naira at the close of trading in Lagos, its biggest advance in five months, on the news of the buyback.
A buyback “should portend something positive for investors as the price begins to climb higher,” Keripe said. “The downside is that it will further create a scarcity of the stock in the market,” he added.
