Recent moves by PZ Cussons Nigeria to convert its $34.3 million (N51.8 billion) debt to equity have generated mixed reactions from shareholders......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
PZ Cussons Nigeria recently unveiled plans to convert a $34.3 million debt owed to the parent company, PZ Cussons Holdings, to equity at the rate of N23.6 per share.
The conversion, being done at an 18% discounted price from the current market value, would increase PZ Cussons Holdings’ stake from 73.27% to 82.79%.
At the end of the debt restructuring plans, the issuance of about 2.19 billion new ordinary shares of 50 kobo each will see PZ Cussons Nigeria’s share capital increase from N1.99 billion to N3.08 billion.
PZ Cussons Nigeria shares is trading on the Nigerian Exchange at N25 as at Wednesday 19, February 2025, having hit a high of N25.80 during the day.
Shareholders say it would erode share value
According to a report from the GUARDIAN, some shareholders have expressed fears that the move could cause financial instability, and ultimately lead to a forced buyout and/or delisting from the Nigerian Exchange (NGX).
While some agree with the company management that the move would help salvage it from financial distress, there are concerns that it could also erode share value, undermining minority shareholders in the long term, and leading to a buyout.
Speaking on the issue, Mr. Patrick Ajudua, the President of the New Dimension Shareholders Association of Nigeria, warned that the deal does not favour minority investors, and could eventually turn into a sort of ‘enslavement’.
He observed that the conversion rate is unfair, and would further dilute shares of minority shareholders leaving them exposed to a buyout from majority shareholders at undervalued prices.
Mr. Adebayo Adeleke, the former Secretary-General of the Independent Shareholders Association of Nigeria, concurred with this take adding that earnings per share would weaken as a result, meaning less returns for investors.
He observed that the move has an upside in that it would take off the debt burden, but pointed out that the resulting valuation would only benefit majority shareholders.
Shareholders could lose everything
In another reaction, Dr. Paul Uzum, the Executive Director of Halo Nigeria Capital Management Limited, remarked that Cadbury Nigeria Plc had done something similar and improved their finances subsequently.
He observed that the discontent coming from minority shareholders is because they were not allowed to participate or maintain their stakes at the same conversion rate.
Similarly, Mr. Eric Akinduro, the President of the Ibadan Zone Shareholders Association, said that the debt-to-equity conversion is the best way out of an already dicey situation.
He said;
“Yes, the ratio is low, but PZ is carrying a $34.3 million debt. If liquidation happens, shareholders lose everything. It is better to accept this deal and focus on rebuilding the company.”
This development debunks rumours that PZ Cussons Holdings is divesting its assets to leave the Nigerian market.
PZ Cussons is not leaving Nigeria
In related news, PZ Cussons Nigeria has debunked rumours of its parent company exiting the business in Nigeria.
The PZ Cussons chief executive officer Jonathan Myers said that the company was facing unparalleled inflation and economic challenges, adding that the naira devaluation had significantly impacted its financials.
But there has been no official communication of any plans to divest.