Controversies rage on as Ecobank opposes Honeywell acquisition by Flour Mills on alleged N3.5bn debt

Flour Mills of Nigeria Plc and Honeywell Flour Mills Plc have,in separate statements on Wednesday night, reacted to a seven-day ultimatum given them by Ecobank Nigeria asking Flour Mills to desist from consummating the planned takeover of Honeywell Flour Mills Plc on the ground that the company was hugely indebted to the bank, and that the N3.5 billion debt has been a subject of litigation. Ecobank lawyer, Kunle Ogunba made this position known in the statement.

However, the two companies assured stakeholders that the agreement to acquire 71.69 per cent of the latter from Honeywell Group Limited is not in breach of any subsisting court order.

In their statement to the Nigerian Exchange Limited as it was seen on its platform, Flour Mills of Nigeria said its “actions are guided by global best practices,” as it works diligently to maintain its reputation as one of the leading and oldest agro-allied companies in the country.

In a separate note to its shareholders, the board of Honeywell Flour Mills Plc said the announcement of FMN’s acquisition of Honeywell Group’s stake “was made in compliance with all rules and regulation.”

Ogunba had in the aftermath of Monday’s announcements cautioned the public and corporate bodies on the danger inherent in dealing in any shares of Honeywell Flour Mills, given its interest in the company, arising from several loan facilities, including working capital advanced to Honeywell Flour Mills Plc. He noted that following the Honeywell Group’s failure to liquidate the said facilities, the bank 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.

Ecobank stressed that Honeywell Group Limited, being the respondent to the winding-up petition, objected to the jurisdiction of the trial court to preside over the suit, which the bank said was upheld by the trial court.

Dissatisfied with the ruling of the trial court, Ecobank said it had filed an appeal, with appeal No: CA/L/1041/2016) at the Court of Appeal, Lagos Division, and that upon review of its case, the appellate court had found merit in the appeal, and held that the winding-up proceedings against Honeywell Group Limited were properly commenced and that the Federal High Court had jurisdiction to hear the said petition.

Ecobank also explained that while the said decision of the appellate court is now before the Supreme Court, even as the Appeal Court judgment remains valid and subsisting till date, stressing that by the provisions of Section 577 of the Companies and Allied Matters Act 2020 “CAMA,” “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”

The bank said the estate of Honeywell Group Limited includes (but is not limited to) its 71.69% stake in Honeywell Flour Mills Plc which it now seeks to divest to Flour Mills contrary to the express provisions of the law which prohibits the said sale/transfer or divestment during the course of the winding-up proceedings.

“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,” Ecobank stressed.

Despite these claims, Flour Mills of Nigeria, in its statement by Joseph Umolu, its company secretary and director, Legal Services, urged stakeholders to maintain their trust in its management.

Honeywell Flour Mills denied the existence of any pending court order restraining trading in the shares, or inhibiting it or its owners from dealing in its assets, further assuring stakeholders “that in all of its engagements with FMN, it received independent legal advice and assets that the transaction is not in breach of any subsisting order of court.”

The issue of whether it is indebted to Ecobank, Honeywell Flour Mills stressed, is still before the courts and the final decision remains the exclusive preserve of the courts, insisting that the Appeal Court judgement under reference in the reports, “did not declare HFMP to be indebted to Ecobank.