Chemical and Allied Products Plc (CAP) and Portland Paints and Products Nigeria Plc have agreed to merge their businesses which will result to all assets, liabilities and business undertakings, including real property and intellectual property rights of Portland Paints Plc transferred to CAP Plc.
The Merger will be executed via a Scheme of Merger (the Scheme) in accordance with Section 711 of the Companies and Allied Matters Act, No. 3 of 2020 (as amended) (CAMA).
Benefits to shareholders
According to the Scheme of Merger, the entire issued share capital of Portland Paints comprising 793,415,535 ordinary shares of 50kobo each will be cancelled. Portland Paints will be dissolved without being wound up; and in consideration for the transfer of all the assets, liabilities and business undertakings, including real property and intellectual property of Portland Paints to CAP, all shareholders of Portland Paints as at the Terminal Date will be offered the Scheme Consideration.
In consideration for the transfer, Portland Paints’ shareholders shall receive a cash consideration of N2.90 for every share held in Portland Paints or 1 share in CAP for every 8 shares held in Portland Paints.
Consequently, Portland Paints will be dissolved without being wound up, delisted from the Main Board of The Nigerian Stock Exchange (NSE) and the registration of the ordinary shares of Portland Paints with the Securities and Exchange Commission (SEC) will be withdrawn.
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The decision to pursue the merger is driven by the Board’s strategic plan to aggressively grow and expand within the Nigerian and African markets under its new leadership. The Board believes that the Proposed Merger presents a unique opportunity that will benefit our shareholders, employees, customers, distributors, suppliers and the broader economy.
Shares trading information
The shares of CAP Plc exchanged at N20 as at Monday January 18, well above its 52-week low of N15.25 but below a 52-week high of N27.50. Also shares of Portland Paints Plc closed on Monday January 18 at N 2.68, nearing a 52-week high of N2.98 as against a corresponding week low of N1.93.
Expected benefits to the companies
Some of the expected benefits to be derived from the Proposed Merger are: Expanded product offering, diversified revenue base, increase in owned brand portfolio, broader distribution capabilities, enhanced operational efficiencies, and economies of scale. Portland Paints is a public company listed on The NSE. UAC of Nigeria Plc (UAC) owns 85.98percent of company’s issued share capital.
Board members views
UAC, as the majority shareholder of both CAP and Portland Paints, will not exercise its right to vote at the Court-Ordered Meeting scheduled on February 18, 2021, however, UAC has informed CAP that it is in full support of the Proposed Merger, according to Awuneba Ajumogobia, chairperson, Board of Directors, Chemical and Allied Products Plc.
“The resultant entity from the Merger will be 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”, said Esosa Balogun Chairperson, Board of Directors, Portland Paints and Products Nigeria Plc.
Who are the financial advisers
Vetiva Capital Management Limited is the Financial Adviser to Chemical and Allied Products Plc while Chapel Hill Denham Advisory Limited is the Financial Adviser to Portland Paints and Products Nigeria Plc.
How it started
In 2019, the new Board and management of CAP Plc embarked on a strategic review of the business with the objective of setting the path for the next level of growth for the company. The outcome of the review was the identification of the five (5) “must win battles” for the company: Grow Volumes; Grow Channels; Grow Portfolio; Invest in People; and Improve Processes.
These five strategic pillars are meant to place the company on the desired growth path that is expected to create exceptional value for shareholders. To this end, the Board of CAP Plc engaged the services of Vetiva Capital Management and Udo Udoma & Belo-Osagie as Financial Adviser and Legal Adviser, respectively to provide advice on inorganic growth opportunities that will enable our company accelerate the achievement of its growth aspirations.
“The Proposed Merger presents a compelling opportunity to create significant value for shareholders of CAP and achieve the company’s strategic growth objectives as a larger company with a broader product portfolio, more corporate owned brands and diversified revenues. The resultant entity is also expected to benefit from enhanced distribution capabilities in addition to economies of scale and operational efficiencies”, she further noted.
Proposed timetable of key events
Proposed timetable of key events show among others that on January 7, 2021 both companies obtained Court Order to convene the Court-Ordered Meetings; on January 13, 2021, they obtained NSE approval to publish Notices of the Court-Ordered Meeting; on March 23, 2021 they will deposit cash consideration into the Cash Consideration Account; on March 26, 2021 the companies will Credit CSCS accounts of /Payment of Cash Consideration to Scheme for Shareholders (as appropriate); while on March 30, 2021 Portland Paints will be delisted from The NSE.
‘No Objection’ from regulators
Both companies 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. Upon receiving shareholders approval, an application will be made to the SEC for the Formal Approval of the Scheme and to the Federal High Court for the sanctioning of the Scheme. The Nigerian Stock Exchange (The NSE) will also be formally notified.
About Portland Paints
Portland Paints is a leading diversified paint and protective coatings company in Nigeria with a thirty-five (35) year track record of manufacturing and selling decorative, industrial and marine/protective coatings for the construction and oil & gas industries in Nigeria. Its flagship brand – Sandtex, is renowned for its exceptional quality for residential, commercial and industrial buildings, as well as its exceptional pricing.
Portland Paints is the Nigerian representative of Hempel Paints South Africa (Pty) Limited (Hempel), a leading global marine and protective coatings company, and leverages Hempel’s global networks to provide services to multiple international clients. The company also operates in the broader industrial segment, with its own Sandtex Industrial brand.
Portland Paints currently has fourteen (14) retail stores (Sandtex Experience Centres) across nine (9) states. The company generated revenue of N2.61 billion in 2019 with the decorative paints’ portfolio and the marine & industrial portfolio accounting for 68percent and 32percent respectively.
About Chemical and Allied Products
Chemical and Allied Products Plc (CAP) is a technological licensee of AkzoNobel Coatings International B.V. (AkzoNobel). CAP evolved from the world-renowned British multinational, Imperial Chemical Industries Plc (ICI), which formalized its Nigerian operations in 1957 under ICI Exports Limited. In 1965, ICI Exports Limited changed its name to ICI Nigeria Limited and in 1968, it was subsumed by ICI Paints Limited. ICI was acquired in 2008 by AkzoNobel.
ICI changed its name to Chemical and Allied Products Limited (CAPL) in the spirit of indigenization and in 1991, CAP became a public company. In 1992, ICI Nigeria Limited disposed-off its 40percent shareholding in CAP when it sold 35.7percent of its equity to UAC of Nigeria PLC (UAC) and the rest to the Nigerian public. As of the date hereof, UAC holds 51.49percent of CAP’s shares. CAP operates within the premium and standard segments of the Paints and Coatings market with flagship brands such as Dulux positioned in the premium segment and Caplux in the standard segment respectively.
CAP generated revenue of N8.41 billion in the financial year ended 31 December 2019, with Dulux contributing significantly to full-year 2019 revenues. Key product lines include: Dulux Paints – The leading premium brand with wide range of interior and exterior decorative products with the best opacity, durability and spreading rates; Caplux Paints – CAP owned-brand with a limited range of decorative products designed for customers seeking value products; and Hammerite – Metal paint requiring minimal surface protection which gives beautiful and long-lasting protection.
