Cadbury Nigeria Jumps 42% after Debt for Equity Notice
Market Wrap: Fast moving consumer goods giant Cadbury Nigeria Plc’s market valuation increased by about 42% due to strong buying interest following management’s decision to convert debt owed to its parent company to equity.
At the end of the trading session on Friday, the market placed N45.17 billion on Cadbury Nigeria’s 18.78 billion shares outstanding on the Nigerian Exchange at a unit price of N24.05.
In an extraordinary general meeting notice submitted to the regulatory last week, the company announced that it plans to convert an outstanding shareholder loan of US$7,718,118.44 or ₦7,036,446,501.261 to equity at an agreed price of ₦17.50 per share.
This will raise Cadbury Schweppes Overseas Limited, the parent company of Cadbury Nigeria Plc stake to 79.39% as the local subsidiary seeks to convert debt to equity, from 74.97%.
According to a document reviewed by MarketForces Africa, between February 2021 and September 2023, Cadbury Schweppes Overseas, advanced intercompany loans totalling USD23 million to Cadbury Nigeria.
The amount was to help settle outstanding third-party loans which the Company had obtained to fund its raw material imports and other input costs. Due to foreign exchange challenges, it becomes difficult for Cadbury Nigeria to meet its foreign exchange balance sheet liabilities to its parent company.
Naira devaluation pushed the local currency value of the amount higher, such that Cadbury Nigeria Plc recorded forex losses on its income statement in the third quarter of 2023. Naira Rises by 19% as Forex Market Pressures Ease
This resulted in an unrealised exchange loss of ₦20.6 billion and a loss after tax of ₦10.2 billion for the period ended, 30 September 2023, the company said in a regulatory filing submitted to the Nigerian Exchange.
The consumer goods company said it has been able to repay Cadbury Schweppes Overseas a total of USD 18.6 million of the principal and accrued interest, with an outstanding balance of USD 7.7 million as of 31 December 2023.
The settlement of a portion of the loan, however, crystallised an estimated foreign exchange loss of ₦13.5 billion, Cadbury Nigeria PLC told the Exchange in a filing. While management plans to sell shares to its parent to eliminate its foreign currency debt obligation, the company market price surged to N24.05 on Friday.
To eliminate the US balance, Cadbury Nigeria will issue an additional 402,082,657 ordinary shares of 50 kobo each to Cadbury Schweppes Overseas. As a result, the Company’s share capital will be increased by ₦201,041,328.50 through the creation of 402,082,657 ordinary shares of 50 kobo each to accommodate the issuance of new shares.
