…Question decision-making policies …CEO: Conversion’ll boost investments
By Chinwendu Obienyi
The dispute between PZ Cussons Nigeria (PZCN) and its shareholders shows no signs of abating, following the collapse of its bid to convert $34.26 million (N51.8 billion) in outstanding intercompany debt owed to PZ Cussons (Holdings) Limited (PZCH) into equity.
According to a filing sent to the Nigerian Exchange Limited (NGX) at the weekend, it announced that its minority shareholders did not approve the decision at its Extraordinary General Meeting (EGM) which took place in Abuja.
The filing noted that while there was strong minority shareholder support for the transaction, a significant minority shareholder bloc voted against the transaction and the approval threshold was not met.
PZCN had said the debt conversion was proposed to resolve challenges stemming from Nigeria’s currency devaluation and historical forex liquidity challenges. In June 2022, PZCH advanced an intercompany loan of $40.26 million to help PZCN settle foreign currency payables for raw materials and operational costs due to the ongoing forex scarcity.
However, following the liberalization of the foreign exchange (FX) market in June 2023 and subsequent naira devaluation, the foreign exchange debt position drove an exchange loss of N157.9 billion, resulting in a N76.0 billion loss after tax and a negative shareholders’ equity position of N27.5 billion for the financial year ended 31 May 2024.
Despite strong operational performance — with 34 per cent and 42 per cent year-on-year (y/y) revenue growth for the periods ended 31 May 2024 and 30 November 2024 respectively, continued Naira depreciation has further eroded operational profits, worsening the negative net equity position to N34.5 billion as of 30 November 2024.
The company further stated that the outstanding loan will be converted at N23.6 per share, an 18 per cent discount to the current market price.
Shareholders who spoke to Daily Sun, believe that while the move is essential to prevent financial collapse, it could also pave the way for a forced buyout and delisting from the exchange which the company previously attempted unsuccessfully.
Chairman, Ibadan Zone Shareholders Zone, Eric Akinduro, voiced strong opposition to the company’s recent actions and proposals. He noted that about two years ago, PZ began selling some of its properties, claiming that they were unprofitable and the proceeds would reduce loans
According to him, the sale of properties did not positively impact the balance sheet, as the funds were used for special dividends, in which a large percentage of dividends went to core investors in Manchester while Nigerian shareholders received less than 20 per cent.
“Converting loans to equity may violate floating policies that require a certain percentage of shares to be held by public shareholders. I strongly suspect that the company wants to exit the stock market and eliminate opposition. How can you convert the debt at N23.60 when its share price closed at N37.10? That is not acceptable as our investments are on the line here”, Akinduro lamented.
President of the New Dimension Shareholders Association of Nigeria, Patrick Ajudua, described the deal as an ‘enslavement’ of minority investors, arguing that it would significantly erode their value in the company.
“The conversion formula is unfair. It is a strategy to box shareholders into a corner and dilute our stake. With a lower conversion rate, the majority shareholder strengthens its control, potentially leading to a buyout at an unfavourable price,” Ajudua said.
In response to what transpired at the EGM, the Chief Executive Officer (CEO) of the company Dimitris Kostianis explained that there was a very strong minority shareholder support for the transaction, with 663 of the 675 minority shareholders present at the meeting voting in favour.
“However, the 75 per cent shareholding vote required to approve the resolution was not met, as 12 minority shareholders representing a significant shareholding voted against the resolution. In compliance with the law, the majority shareholder did not vote on the resolution. In compliance with the law, the majority shareholder did not vote on the resolution.
We believe that there were strong benefits for the company and shareholders from the proposed transaction. By converting the intercompany loan into equity, the company’s exposure to foreign exchange volatility would have been significantly reduced, our balance sheet would have been strengthened, and future cash flow would have been freed up to be allocated to productive investments that support the company’s profitable and sustainable growth ambitions. This would have established the basis for improving shareholder liquidity”, he stated.
The rejection underscores growing shareholder activism in Nigeria, as investors push back against decisions perceived to favor majority shareholders. This raises questions about corporate governance, transparency, and the treatment of minority investors in multinational firms operating in emerging markets.