PZ Cussons Nigeria (PCZN) Plc said it was unable to secure the necessary support from some minority shareholders to convert the N51.79 billion ($34.26 million) outstanding intercompany loan owed to PZ Cussons Holdings (PZCH) into equity.
In a statement on Friday, PZ Cussons Nigeria (PCZN) said voting for the conversion deal was made at the extraordinary general meeting (EGM) held on Thursday in Abuja.
The development comes more than a month after the firm announced its intentions to convert intercompany loans from PZ Cussons Holdings (PZCH), its parent company based in the United Kingdom (UK), into equity as part of a financial restructuring.
The proposed conversion was supported by 663 minority shareholders of the 675 present at the EGM, however, 12 minority shareholders, which the company said represented a significant shareholding, voted against the resolution.
Commenting on the outcome of the meeting, Dimitris Kostianis, chief executive officer (CEO) of PZ Cussons Nigeria, said the opposition made it impossible for the company to secure the 75 percent shareholding vote required to approve the resolution, as PZCH, the majority investor, did not partake in the voting.
“As a response to shareholder feedback received during the meeting, the majority shareholder amended the proposed conversion terms to reduce the level of debt to be converted and increase the conversion price, which would have reduced minority shareholder dilution and also ensured that the Company remained compliant with the 20% free float requirement,” Dimitris said.
“There was 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% 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.”
‘CONVERSION TO EQUITY WOULD HAVE REDUCED FX VOLATILITY’
Kostianis said the conversion of the intercompany loan to equity would have significantly reduced the company’s exposure to foreign exchange volatility.
“We believe that there were strong benefits for the company and shareholders from the proposed transaction,” the CEO said.
“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.
“We would like to thank our shareholders for participating in the EGM and for their active engagement in the process.”
Dimitris said the PCZN board is committed to building on the strong operational growth as “we have seen in H1 of FY25, exploring alternative mechanisms for restoring our net assets to a positive position and to working closely with our shareholders and the broader stakeholder ecosystem during this process”.
PCZN said despite strong operational performance, with 34 percent and 42 percent year-on-year revenue growth for the periods ended May 31, 2024, and November 30, 2024, respectively, continued naira depreciation has further eroded operational profits, worsening the negative net equity position to N34.5 billion as at the end of November last year.
