Nairametrics| Though the Nigerian Stock Exchange has witnessed an uptick, stocks in the healthcare sector have typically being laggards. The pharmaceutical sector in particular has struggled with various challenges such as poor infrastructure, high tariffs on raw materials and difficulties in accessing foreign exchange. Two stocks however, have bucked the trend. Shares of May and Baker year to date have risen 56.38%. Fidson shares are up 39.84% year to date. Both beating the All Share Index which is up 4.61%
The massive increase in the share prices of both stocks has been attributed to rumours of a likely acquisition of May and Baker by Fidson Healthcare. Neither the NSE nor the two companies involved have issued a statement concerning merger talks.
A critical analysis of the financial statements for both companies shows Fidson is a bigger than May and Baker in all ramifications. May and Baker has issued and fully paid share capital of 980 million shares which gives a market capitalization of N1.44 billion at current prices. Fidson healthcare on the other hand has an issued share capital of 1.5 billion making its market capitalization N2.6 billion.
Fidson also has bigger retained earnings. Results for the first quarter ended March 2017, put its retained earnings at N2.9 billion. May and Baker had retained earnings of N919 million as at March 2017. Fidson could therefore buy a 50% stake in May and Baker plc from its retained earnings.
Fidson may be interested in May and Baker because of its bio vaccine and food units. First quarter results show the company made N2.3 billion in revenue, of which N491 million was from the foods unit. Of the total profit of N683 million made, N72 million was made from food.
In response to enquiries from both investors and the NSE, both companies have issued press releases. The Fidson healthcare press release calls talk of a merger /acquisition baseless and speculative. May and Baker in its statement, sees the merger/acquisition talk as malicious, since the current management is strategically positioning the company for greater heights.
