CCNN Gains 9.14% On Merger Plans, As Obu Cement To Parley NGSE Over Free-Float Deficiency

Investors reacted positively to the shares of Cement Company of Northern Nigeria (CCNN), apparently to the merger deal with sister company- Obu Cement, as trading on the Nigerian Stock Exchange (NSE) opened Tuesday, after Monday’s public holiday to mark the Muslim festival of Id el- Maulud.
At the end of Tuesday’s trading session, CCNN notched N1.60 or 9.14% from the N17.50 per share closing price last Friday, closing N19.10 on Tuesday. It however opened for the day at N19.25, which was its day high.
Meanwhile, barring any unforeseen hitches, directors of Obu Cement Plc, the entity that would emerge from the merger with CCNN will engage the management of the Nigerian Stock Exchange (NSE), to discuss the best way to resolve the free-float deficiency, according to the scheme of merger published by the NSE.
Obu cement and CCNN merger is billed for completion before year end, following which the emergent entity (Obu Cement) will be listed on January 8, same day that CCNN entire shares will be delisted from the bourse.
According to the merger document and in accordance with the terms and conditions stated therein, Alhaji Abdulsamad Rabiu, chief executive of BUA Group, core investor in both Obu Cement and CCNN, will hold 18.648bn shares, or 55.07%; while BUA Cement Company Limited, follows with 11.49bn units, representing 33. 93%. This means that Alhaji Rabiu will directly and indirectly control 30.139bn, representing 89.0% stake of the 33.864bn enlarged ordinary shares. This leaves minority shareholders with 3.724bn units or 11.0%, which is lower than the minimum 20% prescribed by the NSE, which the emergent entity says it is conscious of.
Consequently, the directors say “immediately following the Proposed Merger, the Board of Obu Cement will engage the key shareholders of the Enlarged Company and The NSE to agree the appropriate strategy to meet the free float requirement.
“The strategy may include pursuing a premium board listing on the NSE; and/or a controlled sell-down of key shareholders’ stake on The NSE,” the merger document noted.
Using the December-end 2018 pro-forma income statement for the enlarged entity, post-merger, shows revenue of N119.012bn, with Obu Cement accounting for the lion’s share of N87.29bn; while cost of sales stood at N57.801bn (N40.29bn from Obu); resulting in gross profit of N61.211bn. Other income for the period stood at N.136bn, driven by Obu’s N3.892bn; just as the group incurred selling and distribution costs of N6.08bn; administrative expenses, N13.861bn. Profit before tax amounted to N39.411bn; while net profit soared to N64.317bn, on the strength of the N24.905bn tax rebate.