PRESCO Plc, a Nigerian subsidiary of Belgian Siat s.a. agro-industrial company, has cited Nigeria’s currency problems as a key rationale behind its proposed acquisition of 100 percent of Ghana Oil Palm Development Company Limited (GOPDC).
Presco Plc further cited revenue diversification as one of the reasons for its proposed acquisition of GOPDC.
The company, which specialises in oil palm produce, gave the reasons in a statement released on Tuesday, June 4, and signed by Patrick Uwadia, its company secretary.
It said, “Based on the available financial statements, Presco generated 100 per cent of its revenue in local currency (naira) in 2023, while GOPDC generated c.41 per cent of its revenue from export sales primarily in US Dollars and Euro.”
Presco explained that the acquisition would enable it to earn foreign currency in dollars and euros to mitigate the impact of adverse exchange rate movements on the company’s financial performance.
Since the Central Bank of Nigeria (CBN) floated the country’s foreign exchange market, many companies have been suffocating in their operations.
This has led to the steady exit of foreign companies away from Nigeria, arising from the huge foreign exchange losses that have negatively impacted their operations in the country.
Several multinational companies have pulled out of Nigeria, citing unfavourable business environments that have been worsened by foreign exchange problems in the country
GlaxoSmithKline (GSK), Sanofi-Aventis Nigeria Limited, Procter and Gamble (P&G), Jumia Food and Microsoft were among the companies that have exited Nigeria in the past year, The ICIR chronicled in a recent report.
The 100 percent acquisition of GOPDC, which earns about 41 percent of its revenue from export sales in foreign currencies, would enable Presco to hedge against foreign exchange losses that might arise from its operations in the Nigerian market.
A check by The ICIR on Presco’s 2023 audited financial statements shows that its total revenue of N102.42 billion was earned from the Nigerian geographical market.
Similarly, the N42.55 billion total revenue it reported in the first quarter of this year was also earned solemnly from the Nigerian market. This could raise concern as to why Presco is not making export sales to earn foreign currency, hence its determination to acquire Ghana oil palm.
“In line with with this objective, a detailed review of the strategic opportunities available to the Company was explored and the Board reached a decision to propose the acquisition of a 100% equity stake in GOPDC,” it stated.
Other reasons cited by Presco include the desire to increase its market share and customer base, leverage the economies of scale, increase the market value of the entry on the Nigerian stock market, and create access to more capital.
The GOPDC reported net revenue of 456.38 million Ghana Cedi (GH₵) in 2023, but the prospect is that its net revenue will grow to GH₵642.10 million in 2024, GH₵752.16 million in 2025, GH₵879.72 million in 2026, GH₵1.03 billion in 2027, and GH₵1.21 billion in 2027.
Presco said, “The Directors of Presco think that the Transaction would create significant value for shareholders, relevant stakeholders of the Company.”
It hinted that it has made an offer to SIAT SA to acquire 100 per cent of 70,580,000 ordinary shares of GOPDC which translates to a price of approximately USD1.77 for each ordinary share in GOPDC.
“The Acquisition consideration will be settled in phases, with an initial consideration payment of USD64,961,832, with the balance to be settled at a future time.
“Following the conclusion of the Transaction, GOPDC will become a subsidiary of Presco as out in the terms of the Acquisition,” it added.