By SpringNewsNG Media Limited

Recent moves by PZ Cussons Nigeria to convert its $34.3 million (N51.8 billion) debt to equity have generated mixed reactions from shareholders. The company recently unveiled plans to convert this debt, owed to its parent company, PZ Cussons Holdings, to equity at a rate of N23.6 per share. The conversion, which comes at an 18% discount from the current market value, would increase PZ Cussons Holdings’ stake from 73.27% to 82.79%.

As part of the debt restructuring plan, PZ Cussons Nigeria will issue approximately 2.19 billion new ordinary shares of 50 kobo each, increasing its share capital from N1.99 billion to N3.08 billion. As of Wednesday, February 19, 2025, PZ Cussons Nigeria shares were trading at N25 on the Nigerian Exchange, having reached a high of N25.80 during the day.

Shareholders Say It Would Erode Share Value

According to a report from The Guardian, some shareholders have expressed concerns that the move could cause financial instability and potentially lead to a forced buyout or delisting from the Nigerian Exchange (NGX). While some investors agree with management that the conversion would help alleviate financial distress, others worry that it could erode share value and disadvantage minority shareholders.

Mr. Patrick Ajudua, President of the New Dimension Shareholders Association of Nigeria, criticized the deal, stating that it does not favor minority investors and could lead to “enslavement.” He argued that the conversion rate is unfair and would dilute minority shareholders’ stakes, making them vulnerable to a buyout at undervalued prices.

Similarly, Mr. Adebayo Adeleke, former Secretary-General of the Independent Shareholders Association of Nigeria, noted that the move could weaken earnings per share, resulting in lower returns for investors. While acknowledging that the conversion would relieve PZ Cussons Nigeria of its debt burden, he maintained that the primary beneficiaries would be majority shareholders.

Why Shareholders Could Lose Everything

Dr. Paul Uzum, Executive Director of Halo Nigeria Capital Management Limited, pointed out that Cadbury Nigeria Plc had undertaken a similar restructuring in the past, which ultimately strengthened its finances. However, he noted that the frustration among minority shareholders stems from their inability to participate in the conversion on equal terms.

In agreement, Mr. Eric Akinduro, President of the Ibadan Zone Shareholders Association, described the debt-to-equity conversion as the best possible solution given the company’s precarious financial situation. He stated, “Yes, the ratio is low, but PZ is carrying a $34.3 million debt. If liquidation happens, shareholders lose everything. It is better to accept this deal and focus on rebuilding the company.”

PZ Cussons Is Not Leaving Nigeria

This development also counters speculation that PZ Cussons Holdings is planning to exit the Nigerian market. Legit.ng had earlier reported that PZ Cussons Nigeria dismissed rumors of its parent company withdrawing from the country. These rumors arose from PZ Cussons Holdings’ earlier statement about reducing exposure to naira fluctuations following significant losses due to currency devaluation.

PZ Cussons CEO Jonathan Myers acknowledged that the company is grappling with severe inflation and economic challenges. However, he clarified that while the naira devaluation has severely impacted financial performance, there has been no official decision to divest from Nigeria.