The Effects of the Merger of United Nigeria Textiles Plc and Nichemtex Industries Plc on Profitability

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Date
2009
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Journal of Business Administration and Management
Abstract
Why do companies merge? Why are some mergers successful and others not? What is the effect of the 2001 merger of United Nigeria Textiles Ple and Nichemtex Industries Ple on the overall profitability of the group? In finding answers to these and other similar questions, the paper compares five (5) year pre-merger profitability (represented by Earning Per Share, EPS of hed Nigeria Textiles Ple with five (5) year post-merger profitability. Using paired sample test statistic on EPS before and after the merger, it was found that the mean EPS before the merger was 56.66 Kobo compared with a mere 450 Kobo after the merger. The difference of 51.86 Kobo loss is significant at 0.430, thus making it insignificant at 5 per cent. What this means in effect is that the merger has not resulted into an increased profitability at least in the short run. The finding here is quite in agreement with earlier research works on mergers which revealed that mergers, more of the time, do not result in improved profitability or capital appreciation of the acquirer organizations in the years immediately preceding such mergers
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