• Thursday, March 28, 2024
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Focus shifts to pricing of Otedola’s Forte Oil stake sale

Otedola, Zenith Bank donate N400m to Lagos Security Trust Fund

The price at which billionaire businessman and majority shareholder in Forte Oil Plc, Femi Otedola is selling his stake in the oil company is now a source of concern to many equity holders in the company.

Investors are further kept in the dark as both the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) said they are yet to receive Otedola’s application on the proposed divestment of his majority stake in Forte Oil Plc. Otedola’s application to both the market apex and self-regulator is expected to provide details of the transaction, including the price at which the transaction will clear.

Forte Oil Plc had in December last year notified the SEC, the NSE and the investing public that 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 be consummated in this first-quarter (Q1) of 2019 subject to the satisfaction of various conditions and receipt of applicable regulatory approvals.

As at time of filing this report, the securities and investment services department of the SEC had not received the application, and there was also an indication that the securities registration unit of the apex regulator had not received the application.

“No information on the price yet; all they have is formal information that he is selling,” Efe Ebelo, head, corporate communications, SEC, said in a terse message in response to BusinessDay questions.

Otedola reached an agreement with Prudent Energy team, investing through Ignite Investments and Commodities Limited, to divest his 75 percent direct and indirect shareholding in the downstream business of Forte Oil Plc.

Market watchers foresee Otedola selling his equity stake at a premium than a discount.
Forte Oil Plc share price reached a high of N31.85 as at December 28, and the stock declined by 26.7 percent in 2018.

The stock price closed trading at N26.55 per share yesterday, representing a year-to-date (ytd) loss of 7.45 percent.

“To consummate the transaction, the approval of the Nigerian Stock Exchange (NSE) as well as that of the Securities and Exchange Commission (SEC) is required,” Olumide Orojimi, head, corporate communications, NSE, said in an emailed response to BusinessDay enquiries. “As at today [Tuesday], the NSE is yet to receive an application regarding the said transaction, so we are unable to comment on terms which would ordinarily be set forth in such an application, including price and volume et al.”

A look at directors’ interests as at December 31, 2017 shows that Femi Otedola directly holds 186,260,357 units in Forte Oil Plc while indirectly he holds 838,472,441 units. At N26.55 per share as at Monday, January 7, 2019, his stake in Forte Oil Plc is valued at N27.2 billion.
Forte Oil Plc is listed on Petroleum and Petroleum Product subsector of the NSE Oil & Gas sector. It has 1,302,481,103 outstanding shares and market capitalization of N34.5 billion.

Standard Chartered Bank, Corporate Finance & Advisory, Dubai and Olaniwun Ajayi LP served as financial and legal advisors, respectively, to Otedola; PricewaterhouseCoopers and Stanbic IBTC Capital Limited served as Joint Financial Advisors, and Sefton Fross served as legal advisors to Investments and Commodities Limited.

Forte Oil Plc downstream business recorded a turnover of N74 billion in the financial year ended December 31, 2017, representing 38 percent decrease compared to N120.1 billion recorded in 2016. In the financial year, Forte Oil Plc reported 13 percent decline in revenue to N129.4 billion as against N148.6 billion in 2016 financial year. The year in review was very challenging for Forte Oil Downstream Business with reduced product supply owing to foreign exchange scarcity and volatility, the company had said.

“The outstanding subsidy payments persist and remain a source of funding pressure for downstream companies in general,” Akin Akinfemiwa, CEO, Forte Oil Plc, had told shareholders.

 

Iheanyi Nwachukwu