PZ Cussons considers other options if SEC rejects buy-out, delisting plans

…mulls equity issuance, debt for equity conversion, rights issues, asset sales

PZ Cussons Plc will on March 13 hold Extraordinary General Meeting (EGM) in Abuja where the shareholders and the directors of the Company may propose and consider the options available to the Company for dealing with the Company’s ongoing negative net asset position.

The Board of Directors said in a recent note at the Nigerian Exchange Limited (NGX) that it continues to recommend the offer from the Company’s core shareholder, PZ Cussons (Holdings) Limited, to buy out minority shareholders and de-list the company.

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PZ Cussons Plc also said it filed an application with the Securities and Exchange Commission (SEC) in November 2023 for its no-objection to the proposed scheme, and the Company is still awaiting the SEC’s no-objection in order to convene a meeting for shareholders to vote on the proposed scheme.
“The offer was increased from N21 per share to N23 per share as announced on November 9, 2023. The proposed scheme is intended to enable the core shareholder to significantly simplify and strengthen the Company’s operations to allow it to return to longer-term growth,” PZ Cussons said.

PZ Cussons Plc said that if it 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,” PZ Cussons Plc said.

It noted that the ongoing depreciation of the Naira and decrease in volumes of approximately 6percent overall resulted in an Operating Loss of N73.8 billion for the first 6 months of the 2023/2024 financial year of PZ Cussons.

In addition, the Company had a foreign exchange loss of N87 billion on its foreign currency-denominated trade obligations, negatively impacting its operating result.

“The above operating loss is the key driver of the Company having a negative total equity position of N23.2 billion as of November 30, 2023. As of that day, the Group’s financial liabilities, most of which are denominated in foreign currencies, were at n178.0 billion, while the Total Assets were at N154.8 billion.

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“Following the further devaluation of the Naira post November 30, 2023, it is expected that the Group will incur further material foreign exchange losses in relation to liabilities denominated in foreign currencies.

“These will be reflected in future results and will likely result in a worsening of the current negative net asset position.

“Our payables denominated in foreign currencies have increased significantly in recent years, primarily as a result of our inability to source foreign currency to repay our suppliers and other providers of credit. We have benefited from extended payment terms and other support from our affiliated companies, and as a result, the majority of our trade payables are owed to other members of the PZ Cussons group,” PZ Cussons said.