How the board of Obu Cement would look like after merger

Three months ago, Cement Company of Northern Nigeria (CCNN) merged with Obu Cement to form a single entity. Obu will be listed by January 8, 2020.

After the exercise, BUA cement’s (parent company of Obu and CCNN) total capacity hit 8 million metric tonnes, making it the third largest producer of the building material in Africa’s largest economy. Its planned expansion stood at 3.0 million metric tonnes.

It is interesting to note that the merger has changed the ownership structure of the enlarged entity.

From a 12.6 percent ownership stake in CCNN, minority shareholders will now hold an 11.0 percent stake in the enlarged Obu Cement, while BUA Cement Company Limited and Abdulsamad Rabiu will hold 33.9 percent and 55.1 percent stakes, respectively, according to a report by Cordros Capital Limited.

“We understand that 13.1 billion-unit shares of CCNN will be merged with the enlarged entity in a ratio 1-for-1.  However, Obu Cement shares of 40 million will be reconstructed to 518 for every unit held, which will be equivalent to 20.7 billion units,” said analysts at Cordros Limited.

Read also: The Nigerian Code of Corporate Governance, 2018

If 13.14 billion shares are issued at a value of N460.02 billion, it then means that the new entity will have a share price of N35.0, with -premium to current market price.

The merger is coming at a time the industry is poised to benefit from copious capital expenditure by the Federal Government, which will further accelerate demand for cement.

The Buhari-led government earmarked N2.14 trillion for CAPEX spend in 2020, albeit a short fall from N2.93 trillion budgeted in the prior year.