Cadbury Nigeria Plc has announced its intention to present a proposal at an Extraordinary General Meeting (EGM) scheduled for Thursday, February 8, 2024, seeking shareholders’ approval for the conversion of an outstanding intercompany loan of $7.718 million (₦7.036 billion) owed to Cadbury Schweppes Overseas Limited into equity.
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The company’s notice of EGM, disclosed to the Nigerian Exchange Limited and the investing public, outlines the plan to convert the loan into equity by allotting 402,082,657 ordinary shares of 50 kobo each to Cadbury Schweppes Overseas. The proposed conversion is set at a share price of ₦17.50 per share, aligning with the closing share price on December 27, 2023.
Proposed Special Resolution
The statement further details the proposed special resolution to be presented at the EGM, emphasizing the following key points:
a) Conversion of the outstanding intercompany loan into equity, resulting in the issuance of 402,082,657 ordinary shares to Cadbury Schweppes Overseas.
b) Authorization for the Board of Directors to take necessary steps, resolutions, and acts to implement the conversion, including listing the new shares on the stock exchange.
c) Consideration for the increase of the company’s share capital from ₦939,100,981 to ₦1,140,142,309.50 by creating 402,082,657 ordinary shares, with the same rights as existing shares.
d) Authorization for the Directors to take all required steps for the increase in share capital.
e) A special resolution to amend the relevant clause of the Memorandum of Association to reflect the new share capital.
Background and Rationale
Cadbury Nigeria, a subsidiary of Cadbury Schweppes Overseas Limited, has faced challenges in servicing foreign currency-denominated loans due to Nigeria’s persistent forex scarcity. The liberalization of the forex market in June 2023, coupled with currency devaluation, intensified these challenges, leading to an unrealized exchange loss of ₦20.6 billion and an after-tax loss of ₦10.2 billion as of September 30, 2023.
Despite the hurdles, the company has managed to repay $18.6 million of the principal and accrued interest to Cadbury Schweppes Overseas, leaving an outstanding balance of $7.7 million as of December 31, 2023.
In response to these challenges, the Board of Directors explored various options to settle the outstanding shareholder loan and mitigate forex risk. The conversion of the loan into equity emerged as the preferred choice, aiming to deleverage the balance sheet and shield the company from further forex losses.
The terms of the conversion, outlined in a Conversion Loan Agreement (CLA), have been approved by the Board and are subject to shareholders’ approval at the upcoming EGM. Cadbury Nigeria anticipates that this strategic move will enhance financial stability and position the company for sustainable growth.
Ojelabi, the publisher of Freelanews, is an award winning and professionally trained mass communicator and a recipient of the D9112 Superstar Icon Award, who writes ruthlessly about pop culture, religion, politics and entertainment.
