Business
Otedola’s Transcorp foray rattles corporate Nigeria
By AYOOLA OLAOLUWA
Femi Otedola’s bewildering acquisition of controlling 6% stake in Transnational Corporation Plc (Transcorp Group) in a series of deft moves, using his stocks trading firm, Apt Securities and Funds Limited, has continued to shake the corporate world with many describing it as the most audacious move since the First Bank of Nigeria takeover saga of October 2021.
Even if it is simply a brazen business move or leveraging tactic from Otedola’s ‘Art of the Deal’ textbook, the move has raised the prospect of avalanche of future hostile and messy takeovers by shark investors like the Epe-Lagos born businessman in the hitherto saner world of Nigerian corporate business.
For weeks, the mercurial Lagos businessman has been surreptitiously mopping up millions of Transcorp Group shares under the nose of his unsuspecting chairman, Tony Elumelu, from willing shareholders, who could not resist his ‘enticing’ offers.
The deft move will, however, not forever remain a secret. On April 12, 2023, news broke that Nigeria’s version of America’s companies raider, Warren Buffet, who is noted for his perfection of the act of finding high-quality companies at fair market valuations and then hold the investments for huge long term returns, had dethroned Elumelu as the single largest individual shareholder with the acquisition of 6% controlling stake in Transcorp Group, throwing the whole nation into shock and disbelief.
“What did he (Otedola) want again?”, “Is he not contended with First Bank and Geregu Power? Maybe he wants to expand his tentacles in the energy sector with the acquisition of controlling shares in Transcorp Power”, and “What will be the fate of Tony Elumelu”; were some of the words on the lips of many observers.
From that moment onward until the climax on April April 28, perplexed Nigerians were treated to series of intrigues, including deft moves and counter moves by the bidding parties, which eventually culminated in another shock announcement that Otedola had agreed to sell his shares in Transcorp to Elumelu.
Several sources close to the Lagos State born billionaire confirmed to BH that he initially acquired 5.2 percent of Transcorp Plc, about 2.245 billion shares, before pushing it to 6 percent, making him the second largest shareholder of the company behind UBA Nominees.
The share-buying spree, one of the sources disclosed, was made possible by Otedola’s secret contact at the Asset Management Corporation of Nigeria (AMCON), who informed him of the share owner’s indebtedness to AMCON.
Armed with the information, Otedola, it was gathered, approached the embattled loan defaulter and offered to buy his stakes in Transcorp at a premium to help get the funds to pay off his debt.
“The seller was initially skeptical and not too open to the deal. But after several meetings and constant harassments by AMCON, he buckled to Otedola’s overtures by transferring his shares to him, though at a huge fee.
“That was the initial 5.2% shares reported to have been acquired by Otedola on April 12 before he pushed it to 6%”, another source confided in our correspondent.
The source further disclosed that Otedola used his stockbroking company, Apt Securities and Funds Limited, to perfect the deal, explaining why the transaction remained top secret for a long time.
Of all Femi Otedola’s business interventions, his foray into Elumelu’s supposedly business fortress appeared to many as the most outlandish.
This is so as the ‘takeover’ bid of Transcorp Group, composed of several subsidiaries, including Transcorp Hotels, Transcorp Power and Transcorp Energy, was doomed and unlikely to succeed due to Transcorp’s shareholders’ status.
According to several sources in the know, who spoke to our correspondent, what happened at First Bank of Nigeria (FBN) Plc. will not be easy to reenact at Transcorp as the company is almost virtually owned by Elumelu through trusted proxies.
For instance, while Elumelu, before Otedola’s entry was the single largest shareholder in Transcorp Group with 2% equity, UBA Nominees with 9.25 percent equity is the largest group holder. UBA Nominees is, however, controlled by the UBA Group, which has Elumelu as its chairman.
“As of December 31, 2022, only UBA Nominees Limited-Trading held five percent or more of the issued and fully paid shares of 50 Kobo of the company,” Transcorp had said in its latest financial statement.
The financial statement also noted that UBA Nominees’ 9.25 percent stake in the firm amounted to 3,760,000 shares in the period under review.
In the same vein, several other shareholders hold substantial equities from 0.1% to 1.95%, albeit on behalf of Elumelu.
“Those in the know are aware that Transcorp belongs to Elumelu. By the time you put all the shares he controls together, he owns about 55% of the firm’s shares currently in the hands of family members, close associates and business concerns.
“He is not a fool that will leave himself exposed to the vagaries of boardroom politics. The ease with which he pushed his stakes to 25% in a matter of days is a confirmation of his dexterity.
“What baffles me though is that Otedola is also aware of all these. That means he was fully aware before the share raids that he had no chance at all of taking over the company from Elumelu.
“Knowing him (Otedola) well, he must have an ace up his sleeves, which only him can shuffle. In the fullness of time, we’ll know what he is up to”, declared a financial expert, who did not want his identity disclosed.
Otedola’s raid on Transcorp Group, expectedly triggered a share bidding war between the two businessmen, a contest that ended in another shock announcement that he had sold his shares to Elumelu and exited Transcorp Group.
On April 24, Otedola raised his stake in Transcorp to 6.3% with additional share purchases. According to two separate notifications by his brokers, Apt Securities and Funds Limited and Stanbic IBTC Stockbrokers Limited to the Nigerian Exchange (NGX), Otedola purchased additional 105.5 million shares, temporarily raising his holding in Transcorp to 5.8 per cent from the original stake of 2.2 billion (5.5 per cent), declared to the Nigerian Exchange.
Some days later, Stanbic IBTC Stockbrokers Limited, in its own letter, said the energy mogul procured 228.4 million units through the firm, taking his entire holding in Transcorp to 6.3 per cent or 2.6 billion shares worth N6.3 billion before he divested, making him the biggest shareholder in Transcorp after UBA Nominees.
Rattled by the move, Elumelu fought back, raking up more shares from sellers. By the end of April 28, he had personally accumulated 25.58 percent worth N23 billion, up from his initial ownership of 2.07 percent.
When Nigerians were expecting a prolonged bidding war, Otedola unexpected pulled the plug on his quest for the takeover of Transcorp Group by ceding his shares to Elumelu.
The announcement caused a massive shock with Transcorp shares, which had gained 173 per cent from the start of January, slump 9.9 per cent on the Nigerian Exchange (NGX) on April 28. It closed at N1.94kobo at the end of trading on Friday, May 5, 2023, but not before Otedola made a big kill from his dealings.
According to NGX data, Transcorp share had appreciated from N1.4 on April 12 to N3.12 per share on Thursday April 27 (an appreciation of N1.72) on the day Otedola divested.
Though not confirmed, sources close to Otedola disclosed that he moved for Transcorp shares not to take control but to make huge capital gains.
According to the sources, Elumelu agreed to buy Otedola’s 2.6 billion shares for N8.3billion (N3.12 per share it closed on the NGX on Thursday April 27).
With this singular deal, Otedola made a handsome profit of N4.472 billion from the shares he bought for a mere N3.64billion.
While Otedola is smiling to the banks, Transcorp investors are counting their losses as the company’s share price continued to fall on the exchange.
Some of the investors, who spoke with BH on the development, lamented that the move caught them by surprise.
A shareholder of the corporation disclosed that many of them were not prepared for the shock caused by Otedola’s offloading of his shares.
“When he (Otedola) came on board, we were very happy that his coming will change the fortunes of the firm for good, which initially happened with our holdings appreciating by over 100 percent.
“But unfortunately, his unexpected pull out is wrecking havoc. It is only those who sold before April 27 that benefited. Some got as much as N1.20 profit per share. It is people like us that are on the receiving end. I pray that the trend will not continue”, the shareholder prayed.
