History will be made on October 26, 2010, as 100 million shares of Dangote Cement Plc will be listed by introduction, on a special offer, on the Nigerian Stock Exchange, NSE, at N135 per share.
The listing is sequel to the approval from Federal High Court Lagos sanctioning the merger between Dangote Cement Plc, DCP, and Benue Cement Company, BCC, whereby shareholders of BCC will get one of DCP share in exchange for two of BCC.
The enlarged Dangote Cement will constitute over 25 per cent of the entire market capitalization after the listing.
Prior to the listing and special offer day, investors who desire to buy into the offer are expected to make their demands through their stockbrokers. Management of the new company, Dangote Cement, has promised to make any amount of shares required by investors available on the trading floor of the Exchange on the day of listing.
The listing which is the final stage of the merger process is expected to lift the NSE’s market capitalization by about N2.1 trillion.
Following the listing of the new company, shares of BCC will be delisted from the Exchange.
Meanwhile, prospective shareholders in the enlarged Dangote Cement will reap bountifully as the management has also resolved to adequately compensate its investors, in line with the group policy. This much was disclosed in the scheme of merger of both BCC and Dangote Cement.
Financial advisers to the merger, Vetiva Capital management Ltd and Afrinvest revealed that, “…both set of shareholders will continue to enjoy dividend growth in the coming years, taking into account the earnings growth profile of the post merger Dangote Cement Plc and the fact that the prevailing 75 percent dividend payout ratio would be retained.”
A review of dividend history of companies under the Dangote Group listed on the Nigerian Stock Exchange(NSE) indicated that in the financial year ended December 31, 2009, investors received over N23 billion as dividend. The total dividend payout is significant considering the harsh operating environment that arose from the global financial meltdown.
President, Dangote Group, Alhaji Aliko Dangote, who spoke to shareholders assured of immense benefits from the merger which include: reduced operational cost arising from improved efficiency and the remaining five years of tax holiday still being enjoyed by some of the component arms of the emergent company.
According to him: “The proposed merger is conceived with the goal of consolidating the cement producing entities of Dangote Industries Limited in Nigeria under a single entity presenting a robust platform for the enlarged DCP to optimize on available growth opportunities having regard to the present state of the Nigerian cement industry.
This is expected to significantly increase production capacity, boost turnover and profitability and eventually lead to an enhanced dividend payout and capital appreciation for the investors.” “Our reason for listing any of our companies is to take care of shareholders. So far we have given dividend of over N23 billion this
year,” he said. Going by expected revenue growth arising from the merger, among others, he projected that dividend level for the Dangote Group will go to between N50 and N60 billion soon.
In a related development, stockbrokers have endorsed the merger. Chief Executive Officer, Afrinvest West Africa, Mr. Ike Chioke said the merger between the two companies would increase value generation by leveraging positive economies of scale in purchasing and manufacturing.
According to him, “The fact that the merger will account for 25 per cent of the entire market capitalization of the NSE shows that it will boost activities on the exchange. “We are also aware that shareholders in both companies will stand to gain a lot from this merger, as it will benefit them in the area of improved activities, which will translate to higher dividends.”
Another stockbroker, Mr. Tunji Oyebola, said that the merger between the two companies would give the expanded company better access to financing at a low rate, especially as the company would have a larger collection of high quality assets that could be pledged as collateral to lenders.
According to him, “Shareholders of BCC will stand to benefit from the superior production technology of the company, which will also translate to significant cost savings for the company.”