PZ Cussons Nigeria Plc has issued a subtle warning to its shareholders regarding the potential dire consequences if the company’s plans to delist from the Nigerian Exchange Group (NGX) are not approved.
The company’s board recently recommended the offer from the Company’s core shareholder, PZ Cussons (Holdings) Limited, to buy out minority shareholders and de-list the company for ₦23 per share.
The company share price closed at N27.9 on Tuesday, February 20th.
The proposed scheme is expected to enable its core shareholder to “significantly simplify and strengthen the Company’s operations” to allow it to return to longer-term growth.
It also applied with the Securities and Exchange Commission (“SEC”) in November 2023 and awaiting the SEC’s no-objection order to convene a meeting for shareholders to vote on the proposed scheme.
What PZ is saying
The household products manufacturer emphasized the critical nature of obtaining both regulatory and shareholder nods to proceed with its proposed scheme, a move seen as vital for the company’s continuity and financial health.
- According to a detailed document released by the company, failure to secure the necessary approvals could force PZ Cussons into a corner, where it would need to negotiate with its creditors, primarily within the PZ Cussons group, to address its negative net asset position.
The document outlines a range of drastic measures that may be considered to satisfy the company’s obligations to its creditors.
These measures include issuing new equity, converting debt into equity, launching rights issues, selling assets, or undertaking similar actions to generate the necessary funds.
- “If the Company is not able to obtain the requisite regulatory and shareholder approvals to proceed with the proposed scheme, the Company will be required to explore with its creditors, which are primarily members of the PZ Cussons group, ways to address the Company’s negative net asset position and repay or settle outstanding amounts owing to its creditors.
- This could include measures such as equity issuance, debt for equity conversion, rights issues, asset sales or similar. Such measures may significantly dilute or otherwise impact existing shareholders.”
The implications of such measures for existing shareholders could be severe, potentially leading to significant dilution of their shares or other impacts that would adversely affect their holdings.
PZ Challenges
The warning underscores the gravity of the situation faced by PZ Cussons Nigeria and the urgency with which it seeks to restructure its operations and financial setup through the delisting process.
- PZ Cussons, known for its wide range of consumer products including personal care, beauty, and home care brands, has been a significant player in the Nigerian market.
- However, it has faced severe business challenges emanating from currency depreciation and galloping inflation.
- PZ Cussons Nigeria Plc has unveiled its financial results for the second quarter of the fiscal year 2023/2024, where it reported a pre-tax loss of N73.8 billion.
The proposed delisting from the NGX has been framed as a strategic move aimed at providing the company with the flexibility to operate more efficiently and navigate its current financial challenges more effectively.
As the company awaits the decision of its shareholders and the regulatory body, the future of PZ Cussons Nigeria hangs in the balance.
The outcome of the upcoming extraordinary general meeting, where shareholders will vote on the delisting proposal, is eagerly anticipated.