The shares of Portland Paints and Products Nigeria (PPPN) Plc surged 32.2 per cent last week as investors moved to buy into the firm ahead of its proposed merger with Chemical and Allied Products (CAP) Plc.
The boards of directors of CAP Plc and PPPN in the previous week announced the decision to merge their respective businesses to change the Nigerian paints and coatings landscape, create more value to shareholders of both companies.
Although the merger is still subject to regulatory approvals, some discerning investors are increasing their stake in PPPN so as to be shareholders of CAP Plc, which will become an enlarged entity. Seeing PPPN is relative cheaper, investors are acquiring more shares and given the increased demand for the stock, it rose from N2.05 to N2.71.
According to companies, the decision to pursue the merger is driven by the strategic objectives of the boards to drive growth and expansion within the Nigerian and African markets.
The merger will involve the transfer of all PPPN’s assets, liabilities and business undertakings including real property and intellectual property rights to CAP. In consideration for the transfer, CAP is offering shareholders of Portland Paints a choice to receive N2.90 cash every Portland Paints share held or one new ordinary share of CAP, credited as fully-paid up for every eight Portland Paints shares held.
Commenting on the merger, Managing Director of CAP Plc, David Wright, said: “The decision to pursue the proposed merger, is driven by the board’s strategic plan to aggressively grow within the Nigerian and African markets. We believe that the proposed merger presents a unique opportunity that will benefit all stakeholders, from shareholders to customers as well as the broader economy. I am excited by the prospect of an enlarged company with a broader decorative paint portfolio covering the premium, mid-market and affordable segments and the inclusion of marine and protective coatings, all of which will benefit our customers and shareholders.”
On his part, Managing Director of Portland Paints, Bolarin Okunowo, said: “In recent months, the board and management of Portland Paints have evaluated various strategic options with a view to positioning our company to capture emerging growth opportunities. CAP’s business is complementary to ours, and both companies will be better able to serve our respective customers by coming together. I believe the combination of Portland Paints and CAP will yield significant benefits for all of our stakeholders.”
They noted that CAP and PPPN play in distinct segments, and the enlarged CAP will have a broader portfolio covering the top-end/premium decorative segment, the mid-market decorative segments as well as the industrial segment (in particular marine and protective coatings).
They believe that it would provide customers access to a broader product portfolio and a wider range of value options to meet their needs.
“The combination of CAP and PPPN will create a formidable paints and coatings company that will be strategically positioned across segments as a result of its combined brand portfolio,” they added.
They explained that the merger will be executed by way of a Scheme of Merger in accordance with Section 711 of the Companies and Allied Matters Act, 2020 and other applicable laws, rules and regulations.