CAP, Portland Paints Shareholders Hold Pre-Merger Meeting Feb. 18

As UACN Consolidates Stake In Nigeria’s Chemical, Paint Industry

Fresh the recent divestment of its stake in real estate and hotel business- UACN Property Development Company to non-bank financial institution- Custodian Investment Plc, UAC of Nigeria is set to consolidate its stake in the nation’s paint making industry with the merger of Chemical & Allied Products and Portland Paints.

UACN, the country’s largest and most diversified conglomerate owns majority stakes in the two giant chemicals and paints makers.

According to notices filed with the Nigerian Stock Exchange (NSE) on Tuesday, the boards of both companies have scheduled court-ordered meetings on Thursday, February 18, where their shareholders would consider and possibly approve (with or without modification), a Scheme of Merger to be put before them.

“The Scheme will involve the transfer of all Portland Paints’ assets, liabilities and business undertakings including real property and intellectual property rights to CAP. In consideration for the transfer, Portland Paints’ shareholders shall receive a cash consideration of N2.90 for every share held in Portland Paints or one share in CAP for every eight shares held in Portland Paints.”

Consequently, the entire 793,415,535 ordinary shares of N0.50 each issued share capital of Portland Paints shall be cancelled and the company “dissolved without being wound up.”

Both companies affirmed that they have received a “No Objection” from the Federal Competition and Consumer Protection Commission, in relation to competition and anti-trust matters, and a “No Objection” from the Securities and Exchange Commission (SEC) in respect of the proposed merger.”

Post-merger, the emergent CAP Plc will have 99,176,942 12.41 ordinary shares added to its existing shares, bringing the post scheme shares in issue to 799,176,942 units.

UACN holds 682,152,275 units or 85.98% of Portland Paints; while ‘other’ own 111,263,260 shares or 14.02% of its total 793,415,535 units.

UACN also holds 360,427,061 shares or 51.49% stake of CAP, and ‘others’- 339,572,939 shares or 48.51% of the total 700 million units.

The directors say the rationale and benefits of the transaction is an “opportunity to create value for all stakeholders of CAP and Portland Paints. The shareholders of the Merging Entities are well positioned to benefit from the stronger position of the enlarged CAP.”

Among synergies envisaged from the merger include increased value creation, as shareholders of the company become part-owners of a larger and more profitable entity in the medium to long term; besides giving birth to “a larger and stronger company, with an enhanced product portfolio, wider retail network and solid operational base that is better positioned to deliver value to a wide range of customers within the Nigerian market as well as expand across Africa.”

The emergent entity will also be able “to expand its decorative paint offering to include the “premium” segment of the market where the Dulux brand is the leading premium brand, while providing strong footing for accessing the largely untapped high volume “standard/mid-market” through the Sandtex brand.”

The enlarged CAP will benefit from high margins in the premium segment of the market as well as high volumes from the standard/mid-market segment; besides an opportunity to enter into the highly lucrative marine and protective coating segment via Portland Paints’ partnership with Hempel, a global leader in marine and protective coatings. This potentially opens another stream of income for the Enlarged entity, diversifying revenue and growing profitability.

It will also allow for enhanced operational efficiencies and increased profitability and cost savings, by optimizing operational processes and streamlining duplicated costs; it will also allow for increased access to capital at more favourable terms for both equity and debt financing opportunities given the larger operating and balance sheet size of the combined business.

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