Why British investor’s bid to buy PZ Cussons Nigeria fell apart

The deal seeking to sell PZ Cussons Nigeria to core investors from Britain hit a brick wall midway after the Nigerian capital market watchdog sought clarification on some irregularities in the PZ board’s request for approval, sources familiar with the matter told PREMIUM TIMES.

Nigeria’s Securities and Exchange Commission (SEC) raised an eyebrow after pinpointing flaws in the document by PZ Cussons Nigeria asking the regulator to endorse PZ Cussons (Holdings) UK, which has a 73.3 per cent interest in the company to acquire other shares held by minority shareholders.

“Some deficiencies were spotted in the document submitted to SEC by PZ Cussons and those anomalies were queried,” one source involved in the regulatory process said, asking not to be named.

“PZ was notified to effect changes and revert back to the Commission for the letter of No Objection, but it failed to respond. One of the noted deficiencies was that PZ Cussons wanted to buy the shares at a price far less than the current market value.”

CEO Dimitris Kostianis’ biggest assignment since taking the helm at the company last June was arguably to deliver the deal to acquire minority shareholders’ stakes in the entity for PZ Cussons (Holdings) Limited UK, the core investor whose interest he represents on the directors’ board.

PZ Cussons (Holdings) UK set out on 4 September 2023 to purchase other stockholders’ shares numbering 1.06 billion at N21 per unit, an offer with a premium of just 9.9 per cent higher than the closing market price that day.

The board announced an offer review two months after, pricing the potential takeover at N23 per unit.

“The offer price of ₦23 represents a premium of 35% to the Company’s share price of ₦17 on 17 August 2023, being the last traded price prior to the offer date,” PZ Cussons Nigeria said in a regulatory note.

On 9 November 2023, the day the announcement was made, PZ Cussons Nigeria’s shares closed trade in the open market at N21.05.

In the weeks that followed, the stock rose unevenly and closed at N40 per unit on Wednesday morning, when PZ Cussons disclosed that the deal had fallen through.

The Wednesday closing price was 73.9 per cent higher than the N23 PZ Cussons (Holdings) UK tabled as its reviewed offer, making the offer considerably unattractive for investors, who often want the buyout price to come at a premium to the market price.

The book value of the company had plunged N23.2 billion into the red in the six months to last November after reporting a record foreign exchange loss of N52.4 billion, twenty times higher than a year ago, causing its liabilities to surpass its assets.

That was one motivation for the core investor to price the offer low.

All the same, the Nigerian operation of PZ Cussons Plc, the Manchester-based consumer goods manufacturer, remains attractive for any core investor to consider for full ownership.

Nigeria is the largest and most diverse single market of the group, which has footprints in places in Europe, North America, Asia-Pacific, and Africa.

That factor makes divesting its stake in the Nigerian unit not on the cards for the parent company at a time when multinational peers like P&G, GlaxoSmithKline and Sanofi S.A, hard hit by the same foreign exchange crisis in the country, have taken the exit door.

The company has built robust consumer loyalty and carved a sizeable slice of the market for itself with brands like Premier, Imperial Leather, Mamador, King’s Pure Vegetable Oil, Robb, and Morning Fresh among others since its founders, Scottish George Patterson and Greek George Zochonis, opened the Nigerian subsidiary as a trading post 125 years ago.

Nigeria contributed 34.7 per cent (£227.9 million) of the PZ Cussons revenue for 2023, according to its audited earnings report.

The deal seeking to sell PZ Cussons Nigeria to core investors from Britain hit a brick wall midway after the Nigerian capital market watchdog sought clarification on some irregularities in the PZ board’s request for approval, sources familiar with the matter told PREMIUM TIMES.

Nigeria’s Securities and Exchange Commission (SEC) raised an eyebrow after pinpointing flaws in the document by PZ Cussons Nigeria asking the regulator to endorse PZ Cussons (Holdings) UK, which has a 73.3 per cent interest in the company to acquire other shares held by minority shareholders.

“Some deficiencies were spotted in the document submitted to SEC by PZ Cussons and those anomalies were queried,” one source involved in the regulatory process said, asking not to be named.

“PZ was notified to effect changes and revert back to the Commission for the letter of No Objection, but it failed to respond. One of the noted deficiencies was that PZ Cussons wanted to buy the shares at a price far less than the current market value.”

CEO Dimitris Kostianis’ biggest assignment since taking the helm at the company last June was arguably to deliver the deal to acquire minority shareholders’ stakes in the entity for PZ Cussons (Holdings) Limited UK, the core investor whose interest he represents on the directors’ board.

PZ Cussons (Holdings) UK set out on 4 September 2023 to purchase other stockholders’ shares numbering 1.06 billion at N21 per unit, an offer with a premium of just 9.9 per cent higher than the closing market price that day.

The board announced an offer review two months after, pricing the potential takeover at N23 per unit.

“The offer price of ₦23 represents a premium of 35% to the Company’s share price of ₦17 on 17 August 2023, being the last traded price prior to the offer date,” PZ Cussons Nigeria said in a regulatory note.

On 9 November 2023, the day the announcement was made, PZ Cussons Nigeria’s shares closed trade in the open market at N21.05.

In the weeks that followed, the stock rose unevenly and closed at N40 per unit on Wednesday morning, when PZ Cussons disclosed that the deal had fallen through.

The Wednesday closing price was 73.9 per cent higher than the N23 PZ Cussons (Holdings) UK tabled as its reviewed offer, making the offer considerably unattractive for investors, who often want the buyout price to come at a premium to the market price.

The book value of the company had plunged N23.2 billion into the red in the six months to last November after reporting a record foreign exchange loss of N52.4 billion, twenty times higher than a year ago, causing its liabilities to surpass its assets.

That was one motivation for the core investor to price the offer low.

All the same, the Nigerian operation of PZ Cussons Plc, the Manchester-based consumer goods manufacturer, remains attractive for any core investor to consider for full ownership.

Nigeria is the largest and most diverse single market of the group, which has footprints in places in Europe, North America, Asia-Pacific, and Africa.

That factor makes divesting its stake in the Nigerian unit not on the cards for the parent company at a time when multinational peers like P&G, GlaxoSmithKline and Sanofi S.A, hard hit by the same foreign exchange crisis in the country, have taken the exit door.

The company has built robust consumer loyalty and carved a sizeable slice of the market for itself with brands like Premier, Imperial Leather, Mamador, King’s Pure Vegetable Oil, Robb, and Morning Fresh among others since its founders, Scottish George Patterson and Greek George Zochonis, opened the Nigerian subsidiary as a trading post 125 years ago.

Nigeria contributed 34.7 per cent (£227.9 million) of the PZ Cussons revenue for 2023, according to its audited earnings report.