By Azubike Nnadozie
Nigerian oil tycoon, Femi Otedola, on Wednesday, announced his divestment and sale of his 75 per cent stake in Forte Oil, a publicly quoted oil marketing company, to Prudent Energy, a local oil trading firm.
In a message he posted on his Instagram page, the business mogul noted that the sale had been completed and that he was now prepared to focus on Nigeria’s power sector.
This pronouncement has since raised curiosity among some industry players and laymen alike. Some wonder why the Forte Oil boss would close a lucrative oil business in order to embrace investment in Nigeria’s fledgling power sector. Leaving certainty for uncertainty?
How it all started
Last December, Forte Oil announced that its controlling shareholder, Otedola, was selling off his interest in the company. A disclosure notice sent to the Nigerian Stock Exchange had said that Otedola had reached an agreement with another energy firm, Prudent Energy.
“Otedola’s divestment from the downstream business is pursuant to his decision to explore and maximise business opportunities in refining and petrochemicals,” the disclosure sent to the Nigerian bourse said.
Otedola, one of Nigeria’s richest men, acquired a controlling stake in African Petroleum, a struggling petroleum marketer in 2008 and transformed it into Forte Oil. At its peak in 2015, Forte Oil had a market capitalisation of more than $1.4 billion. He last featured on the FORBES list of billionaires in 2015 with a fortune estimated at about $1.8 billion at the time. As one of Nigeria’s most prominent philanthropists, he recently donated $6 million to construct a multi-storey building at the Augustine University in Epe, Lagos, and has recently spent hundreds of thousands of dollars footing the hospital bills of prominent Nigerian celebrities with life-threatening ailments.
Going back to his foray into the oil industry, Otedola had this to say: “A few years ago, my team and I embarked on an arduous task of transforming a moribund petroleum marketing business, African Petroleum Plc (formerly British Petroleum) into Forte Oil Plc; a leading integrated solutions provider, with solid footprints in downstream petroleum marketing, Upstream Services and Power Generation and one in which we built intrinsic value to the benefits of our shareholders. In line with my principle of business focus, we have divested from our marketing and upstream businesses and shall from now on focus and consolidate on the gains of our power generation business, Geregu Power Plc. We wish our successors the very best and urge them to build on our legacies, which have been established since 1964.”
Although the financial details of the transaction were not disclosed, a highly placed Investment Banker was quoted to have disclosed that Otedola sold his Forte Oil shares at a “very significant premium” to its current value. A banker who worked on the deal disclosed that Otedola sold the shares for $250 million.
Forte Oil’s current market cap stood at $125 million as at the close of business on Wednesday.
Otedola has now shifted his focus to the power sector, and has started acquiring power generation and distribution assets in Nigeria. In February, an investment vehicle controlled by Otedola received approval from Forte Oil’s shareholders to enter into negotiations to acquire the power business of Forte Oil.
What Otedola’s divestment means
Asked his view on Femi Otedola’s incursion into the power sector, renowned stock broker, and National Chairman, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said that, as a successful businessman who is well established in the oil industry, Otedola may have decided to try something new. “He might have wanted to go into the power sector since they are interrelated. In the downstream oil business, there is stiff competition, whereas only a few companies are in the power sector. Or better still, he might have made enough money in the oil sector and decided to try new challenges.”
Okezie, however, counseled that if Otedola had fully divested, he should also vacate fully from Forte Oil, and not to still meddle in the affairs of the company. He added that henceforth the identity of the new owners should be unveiled and not be shrouded in secrecy, and a new board constituted immediately.
“Femi Otedola should hands off the running of the oil giants, because that is how it should be after he has sold off his shares, and the total amount realised from the sale must be made public as soon as possible. The Securities and Exchange Commission must have the custody of all the transactions in their kit and they must make sure that nothing goes wrong so that the other shareholders are not short changed,” he advised.
With its share price, which rose by 9.95 per cent to close at N34.35 per share on Thursday, against N31.25 on December 24, 2018, Forte Oil’s shares remained strong despite the announcement by its major shareholder, Mr. Femi Otedola, to divest 75 per cent equities from the oil firm. Investors by Thursday, had N122.778m on 3,574,349 shares in 69 deals. However, stockbrokers who spoke on the new development called for caution until the company disclosed to the public at what share price Otedola is divesting from the oil company.
The December 2018 announcement came after shareholders had in May 2018 approved a restructuring plan pushed by the Otedola-led board of directors aimed at restructuring the group’s operations by divesting from its upstream services and power generating businesses and the sale of its downstream business in Ghana.
In his own reaction to Femi Otedola’s recent divestment from Forte Oil and venture into the power sector, a senior stock broker and member of the Independent Shareholders Association of Nigeria, Mr. Moses Igbrude, told our correspondent that Otedola’s latest move showed that life was dynamic.
According to him, “Femi Otedola is one of those highly gifted with intelligence by God and such people are usually restless. They are always in search of new challenges to exercise their intellect with and new territories to conquer. Remember some time back he had wanted to buy MRS Oil Company and when that failed he had to go for the former African Petroleum (AP) which he and his partners transformed into Forte Oil.”
He described Otedola’s move as an affirmation of the desire to go into a new sector to make impact.
He said, “He wants to leave a sector not well regulated to one where there is more sanity. Otedola wants to be in the ranks of the Rockefellers of this world. I don’t also rule out the influence of his best business partner, Aliko Dangote, upon his life and business.
“Look at what Dangote is currently doing in various sectors of the economy. Today, Dangote is the highest cement manufacturer, not only in Nigeria, but in the whole of Africa. He is into sugar, flour, just name it, and he, in partnership with Otedola and the others, are currently building what may pass for the biggest petroleum refinery in sub-Saharan
Africa.”
He observed that money from the sale of Forte Oil should be invested well, adding that the power sector was an emerging one that is currently not working well but would need people with Otedola’s kind of drive to straighten it out.
Some of the knotty issues in Nigeria’s power sector include epileptic and irregular power supply.
According to Igbrude, the irony of the situation is that Nigeria supplies power to other neighbouring countries who have regular supply while it wallows in darkness.
According to him, one of the problems of epileptic power supply in the country is the fact that the distribution companies (Discos) are not living up to their duty. The generating companies (Gencos) are doing well but a lot of power is lost in the course of distribution. Gencos are working but Discos are waiting for government for funding. They will tell you consumers are owing them so much money, but they have not been able to map out strategies to recover such debts, instead they resort to estimated
billing.
“The power sector needs people like Otedola to bring sanity into it. I look forward to what happened in the Nigerian telecommunications sector happening in the power sector soon,” he added.
