…as share restructuring plan gets FRCN, SEC ‘no objection’
Transnational Corporation Plc (Transcorp) has disclosed its intention to restructure its share capital by reducing the number of its issued ordinary shares.
The company’s share capital is N20.323 billion comprising 40,647,990,293 ordinary shares of 50 kobo each.
United Capital Plc and Vetiva Advisory Services Limited are acting as Financial Advisers to Transnational Corporation Plc in connection with the shares Reconstruction.
The proposed share reconstruction will entail the following: Consolidation of Issued Ordinary Shares – As part of the Reconstruction, the total number of issued ordinary shares of the Company would be reduced by consolidating the issued shares at a ratio of 1 for 4.
Specifically, 3 out of every 4 ordinary shares held by Transcorp’s shareholders will be cancelled. The Company has received the “No Objection” of the Financial Reporting Council of Nigeria (FRCN) and the Securities and Exchange Commission (SEC) in respect of the Reconstruction.
The cancellation and extinguishment of the 30,485,992,719 ordinary issued shares of 50kobo each in the Company will result in the reduction of the issued share capital to N5.080billion (comprising 10,161,997,574 ordinary shares of 50kobo each.
“For the company, the share capital reconstruction will enhance the outlook of the company’s capital structure, making it more streamlined and efficient. By reducing the number of outstanding shares and consolidating them, the company’s balance sheet will appear stronger, potentially improving its attractiveness to investors and lenders,” said Lagos-based Meristem research analysts in their May 10 note to investors.
They also noted that for the shareholders of Transcorp, the initial uncertainty around the process may trigger panic selling.
“However, given that the value of their holdings will remain unchanged, the risk of dilution is eliminated and as such is expected to provide shareholders with confidence in the stability of their investment. However, the reduction in the number of shares may lead to decreased liquidity of the stock on the exchange. With fewer shares available for trading, shareholders may encounter challenges in buying or selling shares, potentially resulting in less flexibility,” Meristem analysts added.
Upon receipt of the approval of Transcorp’s shareholders, an application will be made to the Federal High Court (the Court) for confirmation of the Reconstruction, subsequent to which the remainder shares of the Company will be re-registered with the SEC.
Following the Reconstruction exercise, shareholders of Transcorp will hold the same proportion in the Company’s ordinary share capital relative to each other as they did immediately before the exercise, thus ensuring that there is no dilution of shareholding of the shareholders.
The Central Securities Clearing System (CSCS) accounts of shareholders whose names appear on the Company’s register of members as at the effective date following the order of the Court will be adjusted accordingly shortly after the date approved by the Court (the Effective Date).
An application would be made to the Nigerian Exchange Limited (the NGX) to place the shares of Transcorp on full suspension following receipt of the SEC’s confirmation of registration of the reconstructed shares.
During the suspension period, all relevant adjustments to the number of shares held by each shareholder shall be effected.
The share capital of the Company would be reduced to N5.080 billion by the reduction of the issued shares from 40,647,990,293 ordinary shares to 10,161,997,574 ordinary shares.
This implies a cancellation of 30,485,992,719 ordinary shares of 50kobo each in the Company while maintaining the nominal value of the ordinary shares.
Further to the reduction, the number of remaining shares will be 10,161,997,574 ordinary shares of 50 kobo each. Effectively, the share capital of the Company will stand at N5.080billion. Furthermore, the balance of N15.242 billion (which at the present time represents the capital of the shares that are to be cancelled), will be credited to a special reconstruction reserve. This reserve is established to safeguard that balance for future shareholder distributions (as may be applicable) or for allocation toward value-enhancing endeavours.
Concurrently, there will be a proportional upward adjustment in the quoted share price of Transcorp’s shares on the NGX which will be reflected when the suspension is lifted on the Company’s shares. Consequently, the Company’s market capitalization (being the number of shares in issue multiplied by the market share price) and percentage holding in Transcorp by each shareholder will not change as a result of the proposed Reconstruction. This is without prejudice to any subsequent movement in the share price.
