‘Refrain from the deal’ — Ecobank advises Flour Mills over acquisition of Honeywell Flour

Ecobank Nigeria Plc has advised Flour Mills of Nigeria (FMN) to refrain from the proposed acquisition of major stake in Honeywell Flour Mills.

Kunle Ogunba and Associates, solicitors to Ecobank, said this in a letter addressed to the managing director of Flour Mills. 

The bank claimed that Honeywell Group, the principal company, had not been paying up its loans to the bank.

On Monday, Flour Mills informed investors that it had signed an agreement to acquire a 71.69 percent stake from Honeywell Flour Mills and also a 5.06 percent FBN Holdings equity in Honeywell Flour Mills.

The bank also warned the public and business organisations on the “danger inherent in dealing in any shares of the company.”

Ecobank said it had facilitated several loan services, including working capital disbursements to Honeywell Flour Mills.

It further said that due to the failure of the company to pay off the said loan facilities, it was compelled to commence winding up proceedings against Honeywell Group Limited at the federal high court, Lagos in suit no: FHC/L/CP/1571/2015.

“While the said action was dismissed at the federal high court and the court of appeal, it is 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),” the letter reads.

“Hence, the effect of the above is that there is currently a winding-up action/proceeding pending against the said Honeywell Group Limited.”

The bank quoted a provision of Section 577 of the Companies and Allied Matters Act 2020, that “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…”

Ecobank said the case hinders Honeywell Group from proceeding with the sale of Honeywell Flour Mills to Flour Mills of Nigeria.

“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),” the letter adds.

“Please be further informed that the assets of both Honeywell Group Limited and Honeywell Flour Mills Plc. are the subject of the winding-up action and thus based on the doctrine of “lis-pendens” (in addition to the provisions of CAMA supplied above) you are advised to refrain from dealing with the subject asset which forms part of the subject matter of litigation.”