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What Otedola’s divestment from Forte Oil means

Femi Otedola

With 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, on Thursday, had N122.778m on 3,574,349 shares in 69 deals. Though, stockbrokers who spoke on the development to Daily Trust Saturday, called for caution until the company disclosed to the public at what share price Otedola is divesting from the oil company.

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Forte Oil had on Tuesday, announced Femi Otedola’s divestment of his 75 per cent shareholding in Forte oil to maximise opportunities in refining and petrochemical businesses.

Otedola and Aliko Dangote are in partnership for the construction of a $12bn 650,000 barrels per day (bpd) petrochemical refinery in Lekki, Lagos. The project is expected to come on-stream in 2019.

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Forte Oil, in a statement, said Otedola’s decision to divest from the downstream business was pursuant to his decision to explore and maximise business opportunities in refining and petrochemicals.

The statement, signed by Akinleye Olagbende, Forte Oil’s General Counsel read in part: “Forte Oil Plc hereby notifies the Nigerian Stock Exchange, Securities and Exchange Commission, shareholders and the investing community that its majority shareholder, Mr. Femi Otedola, has reached an agreement with the Prudent Energy team, investing through Ignite Investments and Commodities Limited, to divest of his full 75 per cent direct and indirect shareholding in the company’s downstream business.

“The transaction is expected to close in the first quarter of 2019 subject to the satisfaction of various conditions and receipt of applicable regulatory approval.”

Standard Chartered Bank, Corporate Finance and Advisory, Dubai, and Olaniwun Ajayi LP served as financial and legal advisors to Otedola, while PricewaterhouseCoopers and Stanbic IBTC Capital Limited served as joint financial advisors and Sefton Fross served as legal advisor to Ignite Investments and Commodities Limited.

“There will be no sale of the ordinary shares or any other securities in any state or jurisdiction in which such an offer solicitation or sale is not permitted,” the notification read.

However, a stockbroker and chief dealer with Globalview Capital Limited, Kebira Haruna, expressed worry over the technical know-how and financial capability of the new core investor, Ignite Investments and Commodities Limited, saying that investors would be more cautious in the coming weeks as the event unfolds.

“How efficient are the new investors. Do they have financial muscle to sustain the oil company? What is their pedigree in the business,” he asked

He noted that what the stock market seemed today might not be the true colour of what would happen in few weeks, adding that the share price of Otedola’s divestment would determine the movement of the company’s stocks.

“The share price Otedola is divesting is not known yet. If it’s higher than the N34.35, then it’s good for the market. If it’s lower, the market will tilt towards the price,” he noted

But Dr. Bernard Ilori, Chief Executive Officer of Maxiyield Asset Management Limited, believes that the new deal will create greater potential for the oil company.

Dr. Ilori said, “It is believed that the company has a greater potential than it’s currently doing, and with the new investors coming on board, it is expected that the company will perform better in its product lines.”

Ilori, however, urged investors to exercise caution until the transaction was concluded.

Forte Oil is an oil marketing and power generation company. Originally a Nigerian subsidiary of British Petroleum (BP), Forte Oil has more than 500 gas stations across the country. It owns oil storage depots and manufactures its own line of engine oil.

Since the news was made public on Monday, December 24, 2018, the investing public has been scrambling for the shares of Forte Oil on the floor of the Nigerian Stock Exchange (NSE), pushing up the share price above N30 per share with heavy demand.

The company commenced its divestment plan since 2017 when it started exiting from its subsidiaries which include AP Oil and Gas Ghana Limited (APOG 100 per cent owned), Amperion Power Distribution Company Limited (APDC 57 per cent owned) and Forte Upstream Services Limited (FUSL, 100 per cent owned). Forte Oil Plc thereafter, had its flagship Petroleum Marketing Segment as its surviving business-line post-restructuring period.

The Federal Government is relying on Dangote Refinery to help reduce petroleum products importation. The refinery was early proposed to begin operation in December, 2018, but shifted to 2019.

In 2000, the Federal Government, under the privatisation programme, divested its 40 per cent to core investors and interested Nigerians.

In May, 2007, the shareholding structure took another dimension as Incorporated Trustees of NNPC’s Pension Fund divested its stake to Zenon Petroleum and Gas Limited owned by Femi Otedola, making it the majority shareholder in the company. As a result, Zenon Petroleum and its affiliated entities became the core investor in the company.

Under the new management, African Petroleum embarked on a rebranding and restructuring drive which led to a name change to Forte Oil PLC in December, 2010.

 


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