Solicitors to the Nigerian subsidiary of Ecobank Transnational Incorporated (NGX ticker: ETI) has penned a letter on behalf of the bank, warning Flour Mills of Nigeria Plc (NGX ticker: FLOURMILL) against the proposed acquisition of majority equity stake in Honeywell Flour Mills Plc (NGX ticker: HONYFLOUR).
In the letter, Ecobank Nigeria Limited alleged that Honeywell Group Limited, the parent company of HONYFLOUR, and whom FLOURMILL negotiated the N80bn agreement for 71.69% of HONYFLOUR, had not been paying up its loans from the bank.
The socilitors, Kunle Ogunba and Associates, in the letter addressed to the Managing Director of Flour Mills of Nigeria, cautioned the public and corporate bodies on the “danger inherent in dealing in any shares of the company.”
The bank said that due to the failure of the company (Honeywell Group Limited, owners of HONYFLOUR) to liquidate the said 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 bank claims that as a result of the ongoing law suits, the effect is that there is currently a winding up action/proceeding pending against 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…”
This, according to Ecobank, restricts Honeywell Group from proceeding with the sale of Honeywell Flour Mills to Flour Mills of Nigeria.
It added, “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).
Ecobank has been involved in a long-standing legal battle with Honeywell for over six years over an unpaid debt of N5.5 billion owed it by Honeywell Group.
While Ecobank is maintained 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.
Dr Oba Otudeko, Honeywell Group chairman, had told a Court of Appeal that the sum was owed 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 at 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.
In the letter to Flour Mills of Nigeria Plc, the Solicitors acknowledged while the legal action was dismissed at the Federal High Court and the Court of Appeal, it said that it was 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).
Chronicling the series of court rulings and appeals in 2018, Nairametrics reported the following;
- On Wednesday, July 13, 2016, the Court of Appeal had issued a ruling against Ecobank which the bank thereafter appealed at the Supreme Court.
- In suit No. SC/402/2016, Ecobank had appealed the decision of the Court of Appeal discharging the exparte injunction/asset freezing orders which it had obtained against Honeywell.
- Also in suit No. SC/406/2016, Ecobank had appealed the decision of the Court of Appeal which had affirmed the jurisdiction of the Federal High Court to hear the suit filed by Honeywell Companies.
- The Court of appeal had also ordered the accelerated hearing of the suit at the Federal High Court and Ecobank also challenged this ruling at the Supreme Court.
- The Supreme Court of Nigeria had in July ruled out Ecobank’s appeals against Honeywell for frivolity. In a mutual agreement made by judges of the Supreme Court. According to a released statement, the judges made known that Ecobank’s appeals lack merit.
The market reacted sharply to this development, and sent the shares of HONYFLOUR plunging by 9.78% (the maximum allowable loss on the day) to N3.69.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur