PZ Cussons Nigeria is planning to turn a $34.3 million debt owed to its parent company, PZ Cussons (Holdings), into equity. This change will boost the parent group's ownership in PZ from 73.27% to 82.79%.
In a recent statement, PZ Cussons revealed that the outstanding loan from its parent company is about $34.26 million (around N51.8 billion). The debt will be converted into equity at a share price of N23.60 each, which is an 18% discount compared to the current market price. This conversion is set to create approximately 2,194,716,637 new ordinary shares valued at 50 kobo each.
As a result, PZ Cussons' share capital will rise to N3.082 billion, up from N1.985 billion.
An Extraordinary General Meeting (EGM) is scheduled for March 13, 2025, in Abuja to discuss this matter.
PZ Cussons (Holdings) had previously lent $40.26 million to the Nigerian branch in June 2022 to help with foreign currency payments. However, the Naira's devaluation in June 2023 led to an unrealized foreign exchange loss of N157.9 billion for PZ Cussons Nigeria by the end of the financial year on May 31, 2024.
While PZ Cussons is seeing revenue growth, these FX losses are impacting its operating profit, resulting in negative equity. The company stated that this conversion is essential to strengthen its balance sheet and significantly reduce its FX risk, aiming to return to a positive net asset position.
PZ Cussons has faced tensions with its shareholders, mainly over disagreements regarding its delisting offer price. Since November 2023, the company has been trying to delist from the NGX, initially offering N23 per share to minority shareholders, which was strongly rejected. The offer was then raised to N23, but shareholders still refused, and the SEC also opposed the plan, complicating the exit strategy further.
PZ Cussons has decided to back off from its delisting offer since its shares are currently priced at N27.85, which the company isn't willing to match. , a report indicated.
The lower share price that most shareholders are using to convert their debt into equity is likely to stir up some serious discussions at the upcoming Extraordinary General Meeting (EGM). This situation raises red flags about how it might dilute the value for current shareholders, and it’s a tough break for those who recently bought shares at a higher price.
A big worry here is whether the deal is fair. The majority shareholders are getting shares at a price that’s 18% lower than what the market is currently offering, which looks like they’re getting a sweet deal while minority investors take a hit. This could create a sense of inequality, where the big players benefit at a discount while others see their investments lose value. For those who jumped in at a higher price, this move is a real bummer, as their stake in the company shrinks without any kind of compensation, raising questions about how well minority shareholders are being looked after.