By NKIRUKA NNOROM

The share price of Cadbury Nigeria Plc will still remain over-priced despite conclusion of share reconstruction undertaken by the company that effectively reduced shareholding of minority shareholders, analysts at Meristem, a research and analytical firm, have said.

In a weekly analysis of corporate actions by quoted companies themed, ‘Cadbury Reduction Update’, the analysts said the desire to return the shares to their fair value could be the underlying reason for the share reduction.

Cadbury had recently held a court-ordered meeting where shareholders, though grudgingly, approved the quest by the company to reduce its capital base by up to N12 billion.

The share reconstruction was undertaken through cancellation of two out of five ordinary shares previously held by shareholders as at January 8, 2014.

With the reconstruction, Cadbury hopes to return excess capital of N11.9 billion to its shareholders. The plan also represents a 40 percent reduction in total shares outstanding of the company from 3.13 billion ordinary shares to 1.88 billion ordinary shares and a market capitalisation unchanged at N182.34 billion.

Following the development, the company had early this year, requested the Nigerian Stock Exchange, NSE, to place its shares on full suspension until the requirements of the court sanction approving the capital reduction were complied with.

The share price is presently pegged at N58.27 per share.

Reviewing the proposed share reconstruction, therefore, the analysts said, the action will only affect the shareholding unit of shareholders by a way of 40 percent reduction, while market value remains intact.

“Fixing market capitalisation at N182.34 billion will result in price reconstruction from the current N58.27 to N97.12. While cash return to investor of N9.5 per unit of cancelled share will result in N6.33 per unit of shareholding post reduction exercise.

“In sum, we guess management action is aimed at correcting the market price of the company from the current level to reflect what it deems fair, by returning N12 billion out of its share premium account to investors, an action the management attributes to doing away with excess capital.