• Deal Raises Parent Company Stake To 82.79%

The board of PZ  Cussons Nigeria Plc, Nigeria’s oldest consumer goods companies with operations spanning the baby, hygiene, beauty and electricals

Categories, has scheduled an Extra-Ordinary General Meeting (EGM) in Abuja on Thursday, March 13, 2025, wherein it will seek, as part of special business, shareholders blessing to convert US$34,264,544, an equivalent to ₦51,795,312,646.72.

According to the notice by ALSEC Nominees Limited, the company secretary, posted on the Nigerian Exchange Limited, the amount, which is part of the outstanding intercompany loan owed by the Nigerian arm to PZ Cussons (Holdings) Limited, its parent company is to be converted into equity.

The directors also want the shareholders approval “to take all such lawful steps, pass all requisite resolutions and do all such other lawful acts and/or things as may be necessary for, incidental, supplemental and/or consequential to giving effect to the resolution above including without limitation, appointing relevant professional advisers and listing the new shares on Nigerian Exchange Limited; and that all prior lawful steps taken by the Board in the above regard be and are hereby ratified.”

As part of the agenda for the special meeting, the shareholders are also expected to review and approve 55.27% increase in the company’s share capital from ₦1,985,238,522.50 to ₦3,082,596,841 by creating 2,194,716,637 ordinary shares of 50 kobo each. This will raise the parent company’s stake from 73.27% stake to 82.79%.

The conversion, raises the company’s total shares in issue from 3.97bn to 6.165bn, reducing the holding of other major shareholders including “other shareholders” from 20.25% to 13.04%; while that of CardinalStone, an investment banking group, drops to 3.16% to 4.91%. Others affected include the Asset Management Company of Nigeria (AMCON) and Pension Fund Administrators, whose stakes drops to 1.01% from 1.56%.

The newly created shares will then be allotted to PZ Cussons Holdings “in consideration for the conversion of the intercompany loan, “at the price of ₦23.60 per share, being the share price of the Company as at close of trading on 12 February 2025… on such other terms and conditions as may be decided by the Board; subject to obtaining relevant regulatory approvals.”

The directors further proposes that shareholders authorise the board “to take all steps and execute all documents necessary for, or incidental to, effecting the increase of the Company’s share capital and the allotment of shares to PZCH; (and) that the Board be authorised to issue, create and allot the actual number of shares to PZCH, not to exceed  the number of shares.”

Upon conclusion of the allotment of shares to PZCH, the board further wants the blessing of the meeting “to cancel any outstanding shares not allotted to PZCH.”

Offering a background to the transaction in the explanatory note released through the NGX, PZ Cussons Nigeria, recalled that “in June 2022, PZCH advanced an intercompany loan of USD40.26m to PZCN to help settle outstanding foreign currency payables related to raw material imports, operational and other input related costs that had not been possible to settle due to challenges with foreign currency availability.

According to the explanation, “the liberalisation of the foreign exchange market in June 2023 and attendant devaluation of the currency throughout 2023 and 2024 has had a material adverse impact on the financial results of the Company as the Naira value of its foreign currency denominated loans has increased significantly.

“This resulted in an unrealised exchange loss of ₦157.9 billion, a loss after tax of ₦76bn and a negative shareholders’ equity position of ₦27.5bn for the financial year ended 31, May 2024.

“While PZCN has continued to record strong operational growth, reporting 34% and 42% year-onyear revenue growth for the full and half financial year periods ended 31 May 2024 and 30 November 2024 respectively, further depreciation of the value of the Naira and its adverse revaluation impact on the foreign currency loans of the Company has continued to erode PZCN’s operational profit resulting in losses after tax and a worsened negative net equity position of ₦34.5 billion as of the company’s latest financial results dated 30 November 2024,” the company stressed further.

The directors says it “has carefully considered various options to address the Company’s negative equity position which is considered essential to reposition the Company to the path of profitable sustainable growth.

“This includes settling the outstanding shareholder loan obligation and reducing the overall Company’s exposure to foreign currency fluctuation risk. The Board and PZCH, after extensive discussions, agree that the conversion of a portion of the outstanding loan amounting to USD34.26 million into equity is the most efficient value of debt to be converted into equity and the optimal option for the Company to strengthen its balance sheet and significantly reduce exposure to further foreign exchange losses.”

The conversion is expected to “significantly strengthen PZCN’s balance sheet and support its future growth without excessive dilution to the interests of minority shareholders. Following the conversion, the remaining shareholder loan balance of USD6 million will remain as a loan payable to PZCH.”

The board believes that the conversion will create value for the shareholders and other stakeholders of the company by strengthening the balance sheet, allowing future operating cash flows to be allocated more strategically towards value-creating opportunities that align with the Company’s growth

objectives.

It will also “materially reduce the company’s exposure to foreign exchange risk and its potential impact on Company earnings, thus reducing future foreign exchange losses and further deterioration of the Company’s net asset position.”

The conversion will equally improve the PZ Cussons Nigeria’s financial ratios, such as debt-to-equity and coverage ratios, while potentially enhancing its financial standing and creditworthiness, besides restoring it to a positive net asset position.

“A stronger balance sheet and improved financial ratios could enhance investor confidence in the Company, potentially leading to a more favorable market valuation in terms of share price and increased liquidity for shareholders,” the directors believe.