Cadbury Board Offers Fresh 4.42% Shares To Overseas Investor Over Inability To Pay $7.7m Debt

Cadbury Nigeria has offered to cede an additional 402 million shares or 4.42 per cent equity in exchange for the $7.7 million (N7.03 billion) debt owed to Cadbury Schweppes Overseas Limited.

Cadbury Schweppes Overseas Limited, controlled by Mondelēz International Inc has a 74.97 per cent stake in Cadbury Nigeria or 1,408, 131, 653, shares making it the major investor. The conversion of the $7.7 million debt to equity, will lead to the creation of 402,082,657 shares, which will be handed to Cadbury Schweppes at N17.50 per share.

This will cut other shareholders’ stakes from 25.03 per cent to 20.61 per cent while maintaining the same number of shares (470,070,309) pre-conversion and post-conversion.

The additional 4.42 equity which the shareholders are expected to approve at an extraordinary meeting on February 8, 2024, ahead of the request for the final approval from the Securities and Exchange Commission (SEC) will bring Cadbury Schweppes Overseas shareholding in the Nigerian subsidiary to 1,810,214,310 shares or 79.39 per cent.

In a statement on Tuesday, Cadbury Nigeria said it borrowed $23 million from Cadbury Schweppes to settle outstanding third-party loans obtained to fund raw material imports and other input costs but facing challenges to service the foreign currency-denominated loans owing to persistent foreign currency scarcity in the country.

“The liberalisation of the foreign exchange market in June 2023 and attendant devaluation of the currency put further pressure on the Company as the Naira value of its foreign currency denominated loans increased significantly,” the company said.

“This resulted in an unrealised exchange loss of ₦20.6 billion and a loss after tax of ₦10.2 billion for the period ended, 30 September 2023.”

Cadbury Nigeria said it has been able to repay $18.6 million of the principal and accrued interest to the investor, leaving an outstanding balance of $7.7 million as of December 31, 2023.

It said the settlement of a portion of the loan, however, crystallised an estimated foreign exchange loss of N13.5 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,” Cadbury Nigeria said.

“The conversion of the outstanding loan into equity (the “Conversion”) 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.”

Cadbury Nigeria further said its “share capital will be increased by ₦201,041,328.50 through the creation of 402,082,657 ordinary shares of 50 kobo each to accommodate the issuance of new shares”.

Commenting on the impact of the conversion, the board said it would create value for the shareholders and relevant stakeholders of the company.

Breaking down the impact, The board said it will deleverage the balance sheet and reduce pressure on Cadbury Nigeria’s cash flows, leading to improved liquidity which could be channelled into better uses or returned to shareholders via dividends.

“It will help reduce the Company’s exposure to foreign exchange risk and its impact on earnings,” the board said.

Cadbury Nigeria said it will reduce finance costs and lead to improved profitability, as well as improve its financial ratios, such as debt-to-equity and coverage ratios, potentially enhancing the company’s financial standing and creditworthiness.