By Peter Egwuatu

History would be made in the Nigerian capital market when the merged entity of the recently approved merger involving Benue Cement Company (BCC) Plc and Dangote Cement Plc (DCP) is eventually listed on the Nigerian Stock Exchange (NSE).

•DG, SEC, Arunma Oteh

The merged entity when listed on the Exchange in November would add N2.13 trillion to the market capitalization, thus becoming the highest most capitalised company on the Exchange. This is coming at a time that Nigeria is celebrating its 50 years as an independent nation.

The Banking sub sector has been dominating the Nigerian stock market both in terms of volume of transactions traded and market capitalisation. The sector has accounted for not less than 60 per cent of the market capitalisation especially since after the banking consolidation in 2005.

The banking consolidation brought the number of banks form 89 to 25 before it was eventually reduced to 24. About N350 billion was  raised from the capital market during the consolidation and this led to bigger consolidated balance sheet of banks  from N4.389trn in 2005 to N10.43trn in 2007
It would be recalled that in 2006 the Exchange considered and approved 64 applications for new issues ,mergers and acquisition valued at N1.42 trillion
The history that both the Securities and Exchange Commission (SEC) and NSE would be making next month, November 2010 is when the enlarged entity, Dangote Cement Plc is listed on the Exchange as the market capitalization is expected to jump up to boost the market especially after the market meltdown which led to investors burning their fingers.

Stakeholders have been expecting the market to jump start and eventually stabilise but this has not been realised and confidence in the market keep nosediving.

Market operators have commended the recently approved merger of BCC and DCP, saying SEC and NSE have done well at encouraging and approving the merger. They further opined that when the merged entity is listed the Building Material sub sector would  take over the Banking sub sector in terms of market capitalisation and will give leeway to investors to spread their risk.

Dangote Cement Plc is expected to be listed on the Exchange at N135 per share, a development operstors said would bring a lot of benefits to the shareholders and the general public.

Vetiva Capital Management Limited, adviser to the merger had stated that the merger was conceived to increase value generation through the streamlining of the management, operation and processes of both companies, thereby leveraging positive economies of scale in purchasing and manufacturing, and unifying the companies’ distribution and sales strategies.
According to Votive, “ further to section 30(1) and 32 of the capital gain tax Act, C1 LFN 2004(CGT Act), which specifically exempts from capital gains tax any gains arising from the acquisition of the shares of a company merging with another where the consolidation given is shares and also where one of the merging entities loses its identity, any capital gains arising from the scheme of merger will not be subject to taxation”.

Meanwhile, barring unforseen circumstances, Alhaji Aliko Dangote, President, Dangote Group, had said  that importation of cement into the country would end by June 2011 following the approved merger between Benue Cement Company(BCC) Plc and Dangote Cement Plc.

Speaking at the Court Ordered Extra Ordinary General Meeting to approve the merger in Kano, Dangote assured shareholders and the general public that the merged entity will lead to multiple of benefits to the economy.
One of such benefits, he said was that there would be no need to import cement as the merged entity would be able to produce in mass to meet the demand of cement in the country

According to him, “ The imposition of higher tariff on importation of cement by the government was to encourage local production and reduce importation of sub standard product.

Dangote in his explanation to shareholders of BCC said  the proposed merger between Dangote Cement Plc formerly Obajana Cement Plc and BCC was conceived with the goal of streamlining  the management of both companies and leveraging on positive operational and administrative economies of scale.

According to him, the directors of both companies are of the opinion that significant cost and revenue synergies will accrue from the proposed merger to create additional value to the shareholders of both companies.
He said shareholders would also benefit from ongoing expansion in Ghana, Zambia, Democratic Republic of Congo, Tanzania, Benin Republic , Cameroun among others.

Dangote said “The enlarged DCP (Dangote Cement Plc) would provide a robust platform to drive the expansion of domestic cement production capacity aimed at bridging the significant demand/supply gap for cement in the country.
“The enlarged DCP will capture positive economies of scale and realise significant synergies through enhanced operational and administrative efficiency and a unified service delivery platform” said Dangote

Dangote also argued that growth is also expected to be very rapid if the government commences work towards actualising its vision 2020 programme for housing and transportation, which according to available information  estimates would consume about 919million metric tons over the next ten years.

He said considering the scale of the infrastructure deficit, the industry is confident of infrastructure investment driving demand growth for cement.

“Industry estimates of capacity development and demand growth reveal that  by 2013, capacity may exceed demand by 5.08milliom metric tones.
“This analysis is based on the assumption that cement consumption will continue to grow at an annual rate of 10 per cent and that total installed capacity would reach 26.75 million metric tons per annum after 2012”said Dangote.
Speaking as well, Chairman  of the Association for  advancement of Shareholders, Faruk Umar, while commending the merger plan said  to further create more value for shareholders, the management of the proposed company should work towards achieving an uninterrupted power supply.

Explaining further, Faruk said once there is constant power supply, the cost of production would reduce drastically.
He added  that  chairman of both firms and foremost industrialist, Alhaji Aliko Dangote  contribute significantly to  the  Federal Government effort at job creation, adding that  Dangote  should serve as an intermediary in negotiation on how to achieve stable power supply in Nigeria.