Investors worried over Otedola’s silence on Forte Oil’s divestment

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The Nigerian investing public is worried over the non-completion of the divestment bid of Forte oil, owned by Femi Otedola, who had announced plans to sell his 75% stake in the downstream giant to Prudent Energy

Specifically, the investing public is said to be worried that the company had failed to close the deal and inform them about the divestment as at the end of the last quarter, sequel to the announcement it made last December.

Forte Oil Plc had informed the management and stockbrokers of the Nigerian Stock Exchange (NSE) as well as the Securities and Exchange Commission (SEC) and other stakeholders in December 2018 that Femi Otedola, its chairman and majority shareholder, recently struck a deal to divest his entire direct and indirect stake in the company’s downstream business.

Otedola, the company wrote, struck a deal with the Prudent Energy team, investing through Ignite Investments and Commodities Limited, “pursuant to his decision to explore and maximise business opportunities in refining and petrochemicals”.

According to the statement by Akinleye Ologbende, Forte Oil’s General Counsel, the transaction was expected to close in the first quarter of 2019, subject to the satisfaction of various conditions and receipt of applicable regulatory approvals.

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

Reacting to the deal, analysts at Arthur Stevens Assets Management Limited believe it “may ignite increased selloffs on Forte Oil…”

Besides, 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 as 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 added 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 is lower, the market will tilt towards the price,” he noted.

Besides, Dr. Bernard Ilori, Chief Executive Officer of Maxiyield Asset Management Limited, said that the new deal would create greater potential for the oil company.

He added: “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 had urged investors to exercise caution until the transaction was concluded.

Otedola, through its company, Zenon Petroleum and Gas Limited, bought the stake of Incorporated Trustees of NNPC’s Pension Fund in Forte Oil, then known as African Petroleum Plc 11 years ago.

The development made him the majority shareholder of Forte Oil Plc and the company was rebranded in 2010 to its new name. The company’s performance has been affected by the challenging environment over the years.

For instance, it recorded a profit after tax of N5.794 billion in 2015. This fell to N2.890 billion in 2016 before rising to N12.2 billion in 2017. Profit after tax as at Q3 2018 stood at N79 million.

But the company early last year announced plans to restructure its business by divesting its upstream services, power generating businesses in Nigeria and downstream business in Ghana.

Its shareholders had approved this restructuring plan at the company’s annual general meeting (AGM) last May.

According to the shareholders: “Subject to the approval of regulatory authorities, the directors of the company hereby authorise to restructure the company by divesting its upstream services business (Forte Upstream Services Limited); its power generating business (Amperion Power Distribution Limited and its downstream business in Ghana (AP Oil and Gas Ghana Limited) at such time and such terms and condition as may be determined by directors of the company.”

Forte Oil Plc had said its decision to divest from upstream services and power generating businesses would boost its distributable earnings for the benefit of shareholders.

The company said following the significant changes in the oil and gas industry in recent years, it believes that only downstream operators with huge investments in both storage and distribution infrastructures could remain competitive and operationally efficient in the long run.

Reacting to the failure of the company to keep the investors of the Nigerian Stock Exchange (NSE) abreast of latest development as regards the divestment, Femi Robert, a capital market operator, said investors seemed not to be interested in any development from the company because of its non-profitable nature.

He said: “The company has not been doing well and this may be the reason the preferred investors are not keen at completing the deal on time. Looking at investors on NSE, they do not see anything encouraging in the deal.”

Ambrose Omorodion, Chief Operating Officer, Invest Data Limited, said the silence might mean that the company was either perfecting their plans or have cooled down in their pursuit for the divestment.

The company’s secretary, Akinleye Ologbende, did not respond to our enquiries on why his company kept sealed lips on the divestment plan.

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