We all woke up to the explosive revelations made by billionaire businessman Femi Otedola regarding his bid to take over Transcorp Plc and inject N250 billion into the company.
He accused Mr Elumelu of taking his shares in UBA and Africa Finance Corporation to service the interest on his loans when he went bankrupt in 2008.
He also accused Elumelu of secretly buying shares in Transcorp Hotel and outbidding him to acquire Ughelli Power Plant after he disclosed his interest in the plant to Elumelu.
Understandably, those revelations have intrigued a lot of Nigerians. And as the development continues to dominate discussions across Corporate Nigeria, we at Nairametrics figured it would be good to bring you a timeline of the events that culminated in Otedola’s expose. So, here we go.
Otedola’s acquisition announced
On Tuesday the 11th of April, someone acquired 1.5 billion units of Transcorp Plc shares. It was a surprising development, considering the large volume of the shares. Transactions of this volume seldom happen on the Nigerian Exchange. And so, when it does happen, it dominates the business headlines.
At the time of the transaction, Nairametrics could not confirm who the buyer was. But by the following day, we confirmed that Femi Otedola was the investor. He acquired the shares through one of his companies which bought the shares from a shareholder that has remained anonymous to date.
The acquisition, which represented 5.52% of Transcorp’s entire share capital, made Otedola the second largest investor in the company and positioned him on the right path to potentially take over the conglomerate.
Transcorp initially denied knowledge of any acquisition via a press release published on the Nigerian Exchange on April 13, 2023. It claimed it had not received any formal notification. However, seven days later, on April 20th, it confirmed Otedola’s ownership of 2,245,639,251 units or 5.53% as stated above.
Why 5% is significant
Information contained in the 2022 audited accounts of Transcorp Group revealed UBA Nominees Trading Ltd was the largest shareholder in Transcorp with about 9.25% ownership. Transcorp’s shareholding distribution was so diverse such that about 1,696 entities or individuals owned 89.5% of the company. That was of course, until Otedola’s ownership stake was made public.
Note that in Nigeria, publicly quoted companies are required by law to reveal shareholders with over 5% ownership stake by publicly disclosing them in their annual reports.
However, except for banks, most publicly quoted companies have significant shareholders with ownership stakes exceeding 25%, thus giving them ample power to wield control. Transcorp’s case was, therefore, a surprise, that the single largest shareholder on record only had 9% of a company that was also undervalued at about N40 billion just before the takeover.
The billionaire investor may have seen the diverse shareholding structure of Transcorp as a unique opportunity to surreptitiously secure a stake in the company. It was also a “win-win” for him as it positioned him to either increase his stake to a majority or get a buyout with a premium.
Transcorp Power as a deal motivator
Sources close to Otedola informed Nairametrics that the billionaire viewed the acquisition as a major investment opportunity, citing the power assets owned by Transcorp as very valuable.
There was also a rumour that Transcorp Group was planning to spin off Transcorp Power as a separate entity. There is also precedence as the company had also spun off Transcorp Hotel as a separate entity in 2015. Transcorp Hotel is currently valued at N76 billion, much higher than the group. It seemed logical that Transcorp Power had to be worth more than the hotel as a separate entity.
Transcorp Power, which owns Ughelli Power Plant, Afam Power and potentially Abuja Distribution company was valued along with the hotel asset at N40 billion (before Otedola’s acquisition). Transcorp Power reported a profit after tax of N24.1 billion, representing 86% of group profits. On a multiple of 20x, the power business can be worth as much as N480 billion.
Meanwhile, Geregu Power, which is majority-owned by Femi Otedola, was listed on the NGX in 2022 and was valued as high as N800 billion at some point this year. The company also reported a profit after tax of N10.1 billion.
Owning a 5% stake in Transcorp that cost Otedola, according to our rough estimate, N3.6 billion may be worth N20 billion if the company is valued at a multiple of 20x multiple.
The deal set off a series of events at Transcorp
From the outside, it seemed like all was well but within Transcorp Plc, the power struggle was on. Tony Elumelu’s camp was not ready to go down without a fight. So, they went on a strategic mission to secure and consolidate his control of the company.
In the meantime, Transcorp shares witnessed some bullish sentiments in the days that followed, mainly due to the public’s interest in Otedola’s huge acquisition. Some retail investors envisaged that interesting things were in store for the company. Therefore, it was best to position themselves for the windfall. The share price doubled within a week of Otedola’s purchase.
Millions of shares of Transcorp Plc continued to trade with the share price rising to as high as N2.9 per share. It was just about N1 when Otedola first announced his ownership stake. Behind the scenes, the Otedola and Elumelu camps met through proxies as they negotiated a possible partnership or divestment of Otedola.
An AGM slated for the 26th of April also created a sense of urgency to arrive at a deal between the parties. An important item of discussion at the AGM was a request for the shareholder to give powers to the board and management of the company the authorization to invest in, acquire, or divest from any business and/or carry out any actions, including but not limited to restructuring, reorganization, reconstruction, and such other business arrangement exercise or actions, as the Directors may deem appropriate and in accordance with any relevant laws.
This ostensibly suggests they will have the power to take decisions such as spinning off Transcorp Power as a separate entity. The AGM was organized online via Zoom and was carefully organized to ensure no surprises occurred. As expected, the AGM went without a hitch and all the prayers of the board and management were granted by shareholders.
As soon as the AGM was concluded, the Elumelu camp switched towards seizing control of the narrative and immediately granted an interview with Arise TV the next day. Tony Elumelu went on Arise TV and addressed rumours about a potential spin-off of the power assets.
“No (we are not listing), I hear that rumour from time to time, especially after some competing institutions were listed on the Exchange. No, we are long-term players, we want to grow more and significant value in the power sector,” Elumelu said.
He, however, proceeded to confirm that a spin-off was on the cards, albeit in 5 years, on the condition that transmission lines and challenges with gas would have been fixed.
As expected, Elumelu also addressed his relationship with Otedola and stated that Otedola was his friend. He also welcomed Otedola’s interest in Transcorp and looked forward to working with him.
“I am happy to see an indigenous active investor community and I am happy that Femi is investing locally and should be commended for that.”
Femi Otedola also confirmed the deal on Instagram and said he was looking forward to working with Transcorp’s Board of Directors.
As though to dissuade the media from over-sensationalising the development, the two billionaires displayed bromance on Instagram, showering each other with praises and making it known that they were friends. But outside the public glare, the battle for control of Transcorp Plc was still ongoing.
Elumelu and Otedola’s next surprise move
Just a few days after the ‘public display of affection’ between the billionaire, it was announced that Tony Elumelu’s HH Capital had acquired an additional 9.6 billion units of Transcorp shares, pushing Elumelu’s total stake to 25.58%.
Nairametrics reported that HH Capital is a Special Purpose Vehicle (SPV) owned by Elumelu. It could have also been an acronym for his other company Heirs Holdings. In any case, the acquisition by HH Capital helped solidify Elumelu’s control of Transcorp Plc and inevitably ended any takeover bid from Otedola.
The increase in Tony Elumelu’s stake in Transcorp Plc prompted negotiations for Otedola to exit the company. And after negotiations, both parties agreed that it would be best for the company if they parted ways. Consequently, sold his shares and exited at a premium.
The transaction was consummated using the official market price as of the close of trading on April 27th with the official data indicating a total of 2,413.144,252 shares were sold as an off-market trade based on three deals. The official transaction price was N3.12.
United Capital Securities and APT Securities handled the transaction for HH Capital Ltd and Femi Otedola respectively. Based on the selling price the official value of the sale is about N7.5 billion.
As expected, rumours started spreading about the actual amount HH Capital paid to acquire the shares of Otedola. While the Otedola camp posited a premium was paid, Elumelu’s camp indicated the transaction was consummated at the official price.
However, what we know is that at the time Otedola announced the 5.52% stake, the share price of Transcorp Group was N1.4 per share. Meanwhile, Transcorp also announced an additional acquisition of shares for HH Capital Ltd.
Now, back to Otedola’s expose earlier today
Otedola’s decision to get some things off his chest through the statement he issued has made it clear that there was more to the corporate drama that unfolded over the past weeks.
In his recent press release, Mr Otedola accused Tony Elumelu of taking his shares in UBA and Africa Finance Corporation to service the interest on his loans when he went bankrupt in Nigeria.
He also accuses Elumelu of secretly buying shares in Transcorp Hotel and of outbidding him to acquire Ughelli Power Plant after he disclosed his interest in the plant to Elumelu. However, Otedola does not make any direct accusations against Transcorp Plc or its shareholders.
How we went from a bromance to an all-out accusation from Otedola is a matter that is still unfolding. The accusations made by Otedola in his press release suggest that there may have been underlying issues between him and Elumelu that led to the public drama surrounding the Transcorp acquisition. Otedola’s accusation that Elumelu took his shares in UBA and Africa Finance Corporation to service the interest on his loans when he went bankrupt in Nigeria suggests that there may have been some breach of trust between the two businessmen.
Furthermore, Otedola’s allegation that Elumelu secretly bought shares in Transcorp Hotel and outbid him to acquire Ughelli Power Plant after he disclosed his interest in the plant to Elumelu suggests that there may have been some level of deception or misunderstanding involved in the negotiations between the two parties.
It is possible that Otedola’s decision to make these accusations publicly was motivated by a desire to protect his reputation or to seek some form of redress for any perceived wrongdoing. It remains to be seen how these accusations will be addressed by Elumelu or the relevant authorities, and what further developments may arise in the ongoing corporate drama between the two billionaires.
Transcorp shares gained 9.5% on Tuesday, May 9th to close at N1.94. The share price is however down 36% from its year high. The share price is however up 61.9% in the last one year.