Ten months after acquiring a controlling share in Honeywell Flour, Flour Mills of Nigeria (FMN) is on the verge of losing some of the latter’s assets to Ecobank. In April 2022, Flour Mills purchased a 76.75 percent share in Honeywell through its subsidiary firms, Ecowise Horizon Investment Limited and Creywise Investment Solution Limited, according to Ripples Nigeria.
Prior to the transaction, however, Ecobank and Honeywell had been at odds since 2013 over a N5.5 billion debt due by the food company. Both corporations have been involved in legal battles, with Honeywell insisting on N3.5 billion as the ultimate payment for the debt. However, Ecobank stated that the amount was not the loan balance.
Honeywell’s argument had been supported by the Federal High Court and the Appeal Court, but the Supreme Court decided on Friday against the two lower courts, declaring that Honeywell was still obligated to the creditor.
“I confirm the judgment of the Court of Appeal, striking aside the order of the Federal High Court, granted the appellants’ reliefs,” Justice Emmanuel Agim stated in serving the Supreme Court’s ruling (Honeywell).
Ten months after acquiring a controlling share in Honeywell Flour, Flour Mills of Nigeria (FMN) is on the verge of losing some of the latter’s assets to Ecobank.
Ripples According to Nigerian media, Flour Mills purchased a 76.75 percent ownership in Honeywell through one of its subsidiary firms, Ecowise Horizon Investment Limited and Creywise Investment Solution Limited in April 2022.
Prior to the transaction, however, Ecobank and Honeywell had been at odds since 2013 over a N5.5 billion debt due by the food company.
Both corporations have been involved in legal battles, with Honeywell insisting on N3.5 billion as the ultimate payment for the debt. However, Ecobank stated that the amount was not the loan balance.
Honeywell’s argument had been supported by the Federal High Court and the Appeal Court, but the Supreme Court decided on Friday against the two lower courts, declaring that Honeywell was still obligated to the creditor.
Serving the judgement of the Supreme Court, Justice Emmanuel Agim said, “I affirm the judgment of the Court of Appeal, setting aside the decision of the Federal High Court, granting the reliefs claimed for by the appellants (Honeywell).
“I hold that the appellants’ claim at the trial court fails and it is hereby dismissed,” adding that, “The appellants shall pay the cost of N1 million to the respondent (Ecobank).”
Why this matters
The ruling against Honeywell means the company would not be able to recover its assets used as collateral to obtain the loan from Ecobank.
Honeywell’s prayer at the High Court was to compel Ecobank “to issue letters of discharge, release collaterals by which the prior indebtedness was secured.”
The undisclosed assets which now belong to Flour Mills as a result of the acquisition, will remain with Ecobank and could be cashed in for the loan balance in the event Honeywell fails to repay the loan.
Note that Ecobank had warned Flour Mills against going ahead with the acquisition and also cautioned investors in the capital market with interest in Honeywell shares.
The creditor had stated in November 2021 that it had filed a lawsuit in the Supreme Court to enable it recover the loan extended to Honeywell by winding the company up, “currently a winding-up action/proceeding pending against the said Honeywell Group Limited.”
However, Flour Mills went ahead to acquire Honeywell which was also threatened by the Central Bank of Nigeria (CBN) due to its inability to meet its debt obligation to First Bank of Nigeria (FBN).
Debt concerns for Flour Mills
A year before the transaction, the CBN instructed First Bank to sell its N1.35 billion investment in Honeywell. Flour Mills later purchased the share.
While the precise amount owed to First Bank is uncertain, Honeywell got a loan from FBN in the amount of N13.5 billion. Honeywell was compelled to issue a corporate bond in March 2021 in order to repay the loan after CBN’s warning.
Meanwhile, Ripples Nigeria has learned that Honeywell has an N67.02 billion debt (as of September 30, 2022) to finance at various maturity dates, excluding the Ecobank loan that has been upheld by the Supreme Court.
This means that Flour Mills took on an N67.02 billion debt due to the acquisition of Honeywell, and coupled with the recent Supreme Court decision, the debt burden of Honeywell on Flour Mills continues to eat into its revenue. The loan is 87.6 per cent of the company’s turnover in the same period.
