Nigeria’s billionaire businessman Femi Otedola may be considering plans to acquire upstream assets and power business of Nigerian indigenous oil and gas company, Forte Oil.
This is according to a notice sent to the Nigerian Stock Exchange (NSE) by Forte Oil Plc on Tuesday notifying the NSE of the company’s plans to hold an Extra Ordinary General Meeting (EGM) next month. The EGM, the notice said, will focus on obtaining shareholders’ permission to enter negotiations with Otedola or any company representing him in connection with assets Forte Oil Plc intends divesting from.
“The Shareholders hereby approve that the company may enter into discussion with Femi Otedola or any company representing him in connection with the assets to be divested and subject to an independent valuation on fair value, enter into subsequent binding agreements on comparable armslength/commercial terms in relation to the assets to be divested,” Forte Oil said in a statement to NSE.
Forte Oil noted that members entitled to attend and vote at the EGM are entitled to appoint proxies to attend in their stead. It also excluded Femi Otedola and his indirect holdings, namely Zenon Petroleum and Gas Limited and Thomas Investment Limited, from voting, which is in compliance with the requirement of the NSE rules relating to Board meetings and General Meeting of Issuers.
Recall that in May last year, Nigerian energy firm Forte Oil said it had plans to sell its upstream services and power businesses in Nigeria and divest from Ghana to focus on its core fuel distribution operation at home.
Forte Oil did not give a reason for the change in direction but said the downstream sector in Nigeria had gone through changes in recent years and was expected to evolve further.
It added that the industry has operated under a tightly regulated fixed margin but could be deregulated, especially given its impact on the Nigerian currency and import bill.
The government increased petrol prices by 67 percent, from N87 to N145 in 2016, to cut subsidies paid for fuel imports after a plunge in oil prices hit state revenues, causing dollar shortages and halting infrastructure projects with firms laying off tens of thousands of workers.
Forte Oil has two storage depots, five aviation fuel depots and a lubricant blending plant. It also has 100 trucks for distribution of products across its more than 500 retail outlets which would require a lot of capital to expand.
Its 57-percent-owned power unit, Amperion Power Distribution Company, has a lot of receivables due from the state-backed offtaker and its upstream unit has contributed less than 7 percent to group earnings over the past three years.
The unit in Ghana has declared losses over the last three years and has uncollectible trade debts due to tough economic conditions and a currency devaluation in the cocoa-rich country.
Forte Oil said proceeds from the divestment would be used to expand its downstream fuel distribution business and to invest in storage infrastructure.
“The changing landscape also suggests backward integration would be essential to remain competitive within the sector, particularly in the face of impending deregulation,” it said in the notice.
Last month, Forte Oil announced Femi Otedola’s divestment of his 75 percent shareholding in the company to maximise opportunities in refining and petrochemical businesses.
“Mr Otedola’s divestment from the downstream business is pursuant to his decision to explore and maximise business opportunities in refining and petrochemicals. The transaction is expected to close in the first quarter of 2019 subject to the satisfaction of various conditions and receipt of applicable regulatory approvals,” said the notice, which was signed by Akinleye Olagbenle, Forte Oil’s general counsel.
