- Aliko Dangote's Dangote Cement has carried out a share buyback program
- The program is to allow the cement giant to acquire 168 million of its own shares from the open market or from existing shareholders
- The share buyback initiative is driven by the goal of enhancing long-term shareholder value
Dangote Cement has completed its two-day Tranche 1 share buyback program. The initiative entails the acquisition of 168,735,593 fully paid ordinary shares, accounting for 1% of the presently issued shares.
The share buy-back program commenced on Monday, July 17, 2023, with completion targeted within a two-day timeframe or until the entire tranche size is obtained.
It would be recalled that the cement giant recently unveiled the implementation of advanced technology aimed at preventing environmental pollution caused by dust emissions from its Obajana factory and other operational facilities.
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Dangote Cement's share buy-back program
A share repurchase program, alternatively referred to as a stock buyback program, is a tactic utilized by a company to acquire its own shares either from the open market or directly from existing shareholders.
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The share buyback initiative is driven by the goal of enhancing long-term shareholder value. Moreover, this undertaking is anticipated to assist in the ongoing capital structure and balance sheet optimization efforts of the cement manufacturer.
In this approach, the company utilizes its existing cash reserves or secures funds through borrowing to repurchase outstanding shares.
The acquisition of shares will be carried out from the open market at the Nigerian Exchange Group (NGX).
Subsequently, these repurchased shares will be held as treasury shares, ensuring adherence to the regulations stipulated by CAMA (Companies and Allied Matters Act), the company stated in a press release.
Why Dangote Cement is engaging in share buy-back
Dangote Cement Plc has chosen to implement a share buy-back program as a strategic measure aimed at tackling its high leverage and bolstering investor confidence.
By repurchasing shares, the company reduces its total assets, leading to improved metrics such as return on assets and return on equity when compared to not engaging in share repurchases.
Additionally, a reduction in the number of shares allows for faster growth of earnings per share (EPS) as revenue and cash flow increase.
By repurchasing shares, Dangote Cement Plc. aims to improve the efficiency of its financing and balance sheets, resulting in a reduction in the cost of capital and an enhancement of investors' value.
Dangote now ranked among first 75 richest men globally
However, he made a significant leap, ascending nine places to secure the 75th spot on Wednesday, May 31, 2023.
After persisting within the 80s range for over a year, this remarkable surge in ranking was attributed to the robust performance of Dangote Cement, which serves as his primary source of wealth.
As per the Bloomberg Billionaire Index, Dangote's fortune experienced a substantial increase of $769 million in a single day, reaching $21.2 billion, surpassing the $20.5 billion mark it had maintained for the past four months.