The Dangote Group recently announced that a merger between its subsidiaries—Dangote Sugar, NASCON, and Dangote Rice—will proceed via a scheme of consideration.
In a press release signed by Company Secretary Mrs. Temitope Hassan, the company detailed the conditions under which the merger would be completed as follows:
Eleven (11) ordinary shares of 50 Kobo each in Dangote Sugar Refinery (DSR), credited as fully paid-up shares, will be issued for every twelve (12) NASCON shares of 50 Kobo each. This equates to 2,428,651,847 new ordinary shares of DSR.
Fourteen (14) ordinary shares of 50 Kobo each in Dangote Sugar Refinery, credited as fully paid-up shares, will be issued for every one (1) ordinary share of N1.00 Kobo each in Dangote Rice Limited (DRL). This results in 2,775,792,508 new ordinary shares of DSR.
What this means for shareholders
To determine what this means, we will have to rely on a simple mathematical formula used by investors to make calculations.
Example
DSR Shares (11) = A
NASCON (12) = B
What you own (example 100) = C
The formula is C/B multiplied by A.
Nascon Shareholders: They will be getting 11 ordinary shares of Dangote Sugar Refinery for every 12 they have in NASCON. Let us illustrate with an example.
- If you have 100 shares of NASCON, you will be getting approximately 92 shares in Dangote Sugar Refinery and will now be a shareholder of the latter.
- If you have 200, shares in NASCON you will be getting approximately 183 shares in DSR. And if it was a random number like 443, you would be getting 406 units in DSR.
- NASCON will cease to exist as a company, as all its shareholders will become DSR shareholders.
Dangote Rice Limited (DRL)Shareholders: They will be getting 14 ordinary shares in DSR for every 1 they own in DRL. Let us illustrate with an example.
- If you have 100 shares of DRL, you will be getting approximately 1,400 shares in Dangote Sugar Refinery (DSR) making you a shareholder of DSR.
- If you have 250, shares in DRL you will be getting approximately 3,500 shares in DSR. With a random number like 670, you would be getting 9,380 units in DSR.
- DRL will cease to exist as a company, as all its shareholders will become DSR shareholders.
Dangote Sugar Refinery: According to the press release, the shareholders of the company will be diluted by 2,428,651,847 new ordinary shares for NASCON and 2,775,792,508 new ordinary shares of DRL, totaling 5,204,444,355 shares of Dangote Sugar Refinery Shares.
This will increase Dangote Sugar Refinery’s current 12,146,878,241 outstanding shares by 5,204,444,355 shares, or 42.8%. Despite this dilution, the market value of the company is expected to increase.