January 10, 2020/United Capital

Yesterday, the total market capitalization of the Nigerian Stock Exchange (NSE) shoot up from N13.8tn to N15.2tn. This was on the back of the listing of 33.9billion units ordinary shares of BUA Cement Plc (BUACEMENT) at N35/share. This added N1.3tn to the overall market capitalization. Accordingly, BUACEMENT emerged as the third most capitalized stock on NSE, displacing NESTLE.

Brief overview of BUA Cement listing and the delisting of CCNN

On the 24th of Dec-19, the NSE suspended all trading activities in the shares of Cement Company of Northern Nigeria (CCNN) following the court’s sanction of the scheme of merger between CCNN (with 2.0mmtpa installed capacity) and OBU Cement Company (with 6.0mmtpa installed capacity) – both members of the BUA Group.

Accordingly, the completion of the scheme of merger led to the delisting of CCNN and listing of the enlarged firm, BUA Cement Plc. (previously Obu Cement Ltd), on the NSE. Also, the enlarged company, BUA Cement Plc, with a total installed capacity of 8.0mmtpa is now some step closer to Lafarge Nigeria’s (second largest cement maker) 10.5mmtpa installed capacity.

Current Shareholding Structure and Pricing

According to the scheme of merger document, Obu Cement’s (now BUA Cement Plc) 40.0 million ordinary shares of 50 kobo each was reconstructed to 20.7 billion shares of 50 kobo each in the enlarged entity, representing a 1 for 518 share conversion ratio. Meanwhile, CCNN’s shareholders were awarded a 1 for 1 conversion ratio. Thus, the component of the outstanding shares of the enlarged entity comprised the 13.1 billion ordinary shares of the defunct CCNN and the reconstructed 20.7 billion new shares to shareholders of Obu Cement Company.

Upon listing on the NSE, the enlarged company (BUA Cement Plc) was valued at N35.0/share. Thus, the share price of the existing shareholders of CCNN rose from N18.8/share (the closing price as at the date of full suspension) to reflect the transaction price of N35.0/share, before closing at N41.0/share on the 10th of January.

Our Opinion

In our opinion, we expect BUA Cement Plc to leverage its market leadership positions in its key regional markets of the North West, South-South and South-East Nigeria due to its location and proximity to those markets, to ramp up volumes. Based on the latest development, we are currently reviewing our model to factor the impact of the merger on performance going forward. However, we expect demand for the newly listed ticker to continue to buoy the share price in the near term.

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