Diageo Scraps Plans to Raise Stake in Guinness Nigeria

By Saabira Chaudhuri

Diageo PLC has ditched plans to raise its stake in Guinness Nigeria, blaming challenging marketing conditions in the country over the past year.

Diageo last year said it planned to offer to increase its stake in the Nigerian Stock Exchange-listed Guinness Nigeria--which houses brands such as Guinness, Harp and Malt--to 70% from 54.3% in a roughly $208 million offer. The move would have been a way for Diageo to wield more control over its African business.

But Nigeria's oil-dependent economy has slowed and Guinness Nigeria's shares have dropped 35% over the past 12 months.

Guinness Nigeria in a statement late Tuesday said Diageo will "focus its resources on continuing to support Guinness Nigeria," adding that "Nigeria remains a key strategic market" for the London-headquartered company.

Diageo last month provided Guinness Nigeria with a $95 million loan. Nigeria makes up roughly 3% of Diageo's revenue.

The reversal comes after Africa's most populous nation has seen growth slow--recently entering its first technical recession since 2004--following the oil-price crash and a raft of political and security challenges. Dwindling oil revenue has fed a dollar shortage in Nigeria, as the government hoards foreign currency to safeguard shrinking reserves. That has hammered operations for businesses large and small, leaving factories, supermarkets and power plants unable to pay for goods.

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

October 05, 2016 10:18 ET (14:18 GMT)

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