Cadbury Nigeria Rights Issue - What Is This All About?

CADBURY NIGERIA COMMENCES RIGHTS ISSUE PROCESS

Following shareholder approval at the Annual General Meeting held on 4th June 2009, Cadbury Nigeria plc confirms that it has commenced the process of the rights offer to existing shareholders.
 
In this respect, the draft rights issue circular and other relevant documentation has been lodged with the regulatory authorities for approval. Consequently, a technical suspension has been placed on trading of the Company’s shares, in accordance with capital market rules.

As this application is subject to approval by the appropriate authorities, the Company will not be in a position to make available any further information on the offer within this intervening period.

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A rights issue is a way in which a company can sell new shares in order to raise capital. Shares are offered to existing shareholders in proportion to their current shareholding, respecting their pre-emption rights. The price at which the shares are offered is usually at a discount to the current share price, which gives investors an incentive to buy the new shares — if they do not, the value of their holding is diluted.

The rights are a trade-able security themselves (a type of short dated warrant). This allows shareholders who do not wish to purchase new shares to sell the rights to someone who does. Whoever therefore holds a right can choose to buy a new share (exercise the right) by a certain date at a set price.