Shareholders Reject PZ Cussons’ $34.26m Debt Conversion Plan

PZ Cussons Nigeria Plc (PZCN) has announced that minority shareholders have voted against a proposed conversion of $34.26m (₦51.8bn) of intercompany debt into equity.

The decision was reached at the company’s Extraordinary General Meeting (EGM) held at the Transcorp Hilton Hotel in Abuja, where shareholders convened to deliberate on the future financial stability of the company.

Despite a significant portion of minority shareholders supporting the transaction, a crucial shareholder bloc opposed it, preventing the proposal from meeting the required 75 per cent approval threshold.

Under corporate governance regulations, PZ Cussons (Holdings) Limited (PZCH), the majority shareholder, abstained from voting on the resolution. Out of the 675 minority shareholders present, 663 voted in favour of the debt-to-equity conversion, while 12 minority shareholders representing a substantial shareholding stake voted against the transaction.

According to the company in a notice to the Nigerian Exchange Limited (NGX), the proposed conversion was introduced as a strategic measure to mitigate the financial strain resulting from Nigeria’s persistent currency devaluation and foreign exchange liquidity challenges.

In June 2022, PZCH extended an intercompany loan of $40.26m to PZCN to help the company settle foreign currency payables for essential raw materials and operational costs amid Nigeria’s worsening forex scarcity.

However, the sharp depreciation of the naira following the liberalisation of the foreign exchange market in June 2023 exacerbated the company’s forex exposure, leading to substantial financial losses.

PZCN recorded an exchange loss of ₦157.9bn, resulting in a ₦76.0bn post-tax loss and a negative shareholders’ equity position of ₦27.5bn for the financial year ending May 31, 2024.

Despite reporting strong operational growth—registering 34 per cent and 42 per cent year-on-year revenue increases for the periods ending May 31, 2024, and November 30, 2024, respectively—the continued depreciation of the naira further eroded profits, worsening the company’s negative net equity position to ₦34.5bn as of November 30, 2024.

In response to concerns from minority shareholders, PZCH revised the proposed terms before the EGM, reducing the level of debt to be converted and increasing the conversion price to minimise shareholder dilution.

These adjustments were also intended to ensure PZCN remained compliant with the Nigerian Exchange Group’s 20 per cent free float requirement. However, the amendments did not secure the necessary votes for approval.

Commenting on the outcome, PZCN CEO Dimitris Kostianis expressed appreciation for the shareholders’ participation and engagement in the decision-making process.

“We would like to thank our shareholders for participating in the EGM and for their active engagement in the process. 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 per cent free float requirement,” he said.

According to Kostianis, 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 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. 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,” he said.

The failure to secure approval for the debt conversion raises concerns about PZCN’s financial position and future sustainability.

Shareholders Reject PZ Cussons’ $34.26m Debt Conversion Plan is first published on The Whistler Newspaper