According to a statement from Cadbury Nigeria Plc, the firm will ask shareholders at an Extraordinary General Meeting (“EGM”) for permission to convert an outstanding intercompany debt owed to Cadbury Schweppes Overseas Limited totaling $7.718 million (₦7,036 billion) into equity.
This was stated in the notification of the company’s EGM that Nairametrics saw, which was sent to the Nigerian Exchange Limited and the Investing Public, and was scheduled for Thursday, February 8, 2024, in Lagos.
The announcement states that in the event that the proposal is approved by the shareholders, 402,082,657 common shares, valued at 50 kobo apiece, will be distributed to Cadbury Schweppes Overseas in order to convert the loan into equity.
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It noted that each share is to rank pari passu in all respects with the existing ordinary shares in the capital of the Company, at the price of ₦17.50 per share, being the share price of the Company as of the close of trading on December 27, 2023, and on such other terms as may be agreed by the Directors subject to obtaining relevant regulatory approvals.
Proposed Special Resolution of the Company:
The statement reads:
“That the outstanding intercompany loan of US$7,718,118.44 (Seven Million, Seven Hundred and Eighteen Thousand, One Hundred and Eighteen US Dollars, Forty-Four Cents) (equivalent to ₦7,036,446,501.26 ( Seven Billion, Thirty-Six Million, Four Hundred and Forty-Six Thousand, Five Hundred and One Naira, Twenty-Six Kobo) owed by the Company to Cadbury Schweppes Overseas Limited (“Cadbury Schweppes Overseas”) be converted into equity by the allotment of 402,082,657 ordinary shares of 50 kobo each to Cadbury Schweppes Overseas, each share to rank pari passu in all respects with the existing ordinary shares in the capital of the Company, at the price of ₦17.50 per share, being the share price of the Company as at close of trading on December 27 2023 and on such other terms as may be agreed by the Directors subject to obtaining relevant regulatory approvals;
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b) That the Board of Directors be and are hereby authorized to take all such lawful steps, to pass all requisite resolutions, and do all such other lawful acts and/or things as may be necessary, incidental, supplemental, consequential to giving effect to resolutions above including listing the new shares on the stock exchange; and all prior lawful steps taken by the Directors in the above regard be and are hereby ratified”.
The statement signed by Mrs. Fola Akande, Esq. Company Secretary/ Chief Counsel also noted that company will also seek shareholders consideration that (a) the Company’s share capital be increased from ₦939,100,981 to ₦1,140,142,309.50 by the creation of 402,082,657 ordinary shares of 50 kobo each, such shares to rank pari passu in all respects with the existing Ordinary Shares in the Capital of the Company.
“That the shares created under paragraph (a) above be allotted per the terms of Resolution 1 above; c) The Directors be authorized to take all steps necessary or incidental to affecting the increase. 3. To consider and if thought fit, pass the following as a Special Resolution of the Company: a) That the relevant clause of the Memorandum of Association of the Company be amended as necessary to reflect the new share capital of the Company,” it noted.
What you should know:
Cadbury Nigeria Plc is a subsidiary of Cadbury Schweppes Overseas Limited, an entity controlled by Mondelēz International Inc.
Cadbury Schweppes Overseas holds a 74.97% stake in Cadbury Nigeria. Between February 2021 and September 2023, Cadbury Schweppes Overseas, advanced intercompany loans totaling USD23 million to Cadbury Nigeria to help settle outstanding third-party loans that the Company had obtained to fund its raw material imports and other input costs.
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The Company has however faced challenges with servicing its foreign currency-denominated loans due to Nigeria’s persistent foreign currency scarcity.
According to the company, the liberalization of the foreign exchange market in June 2023 and the attendant devaluation of the currency put further pressure on the Company as the Naira value of its foreign currency-denominated loans increased significantly.
This resulted in an unrealized exchange loss of ₦20.6 billion and a loss after tax of ₦10.2 billion for the period ended, 30 September 2023.
The company noted that despite these challenges, the Company has been able to repay Cadbury Schweppes Overseas, a total of USD18.6 million of the principal and accrued interest, with an outstanding balance of USD7.7 million as of 31 December 2023.
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The settlement of a portion of the loan, however, crystallized an estimated foreign exchange loss of ₦13.5 billion.
In light of the above, the Board of Directors of Cadbury Nigeria has considered various options for settling the outstanding shareholder loan obligation and reducing the Company’s exposure to foreign currency risk.
According to the company, the conversion of the outstanding loan into equity was selected as the optimal option for the Company, as it is expected to deleverage its balance sheet and save the Company further foreign exchange losses.
The Board of Directors has engaged with Cadbury Schweppes Overseas on the terms for the Conversion which are captured in a Conversion Loan Agreement (CLA).
These terms have been approved by the Board and are now being recommended for approval by shareholders at an Extra Ordinary Meeting (EGM) to be held in Lagos, on 08 February 2024.
