Otedola’s Strategic Investment In Blue-Chip Enterprises Is Intriguing
Femi Otedola, a billionaire businessman, has been working to increase his holdings in blue-chip companies. Last week, he allegedly acquired 5.52 percent of Transnational Corporation Plc, leading to the purchase of N 2.245 billion worth of the company’s stock through a deal with the Asset Management Corporation of Nigeria (AMCON).
One of the largest companies in Nigeria is Transcorp, which has holdings in the tourism, energy, and oil and gas industries.
It’s possible that the decision by AMCON to sell shares has something to do with the upcoming increase in stock value. In the last few years, stocks with high market capitalization have greatly increased.
The market capitalization of the NGX rose from N16.15 trillion in 2018 to N28.25 trillion in 2023, an increase of N13 trillion or 43%.
Despite the company’s denial of any notification of a potential Otedola share acquisition, the strategic investment led to an unheard-of increase in Transcorp’s valuation.
The stock price increased to N1.69 kobo at the close of trade on Friday from N1.37 kobo, where it closed for trading on Friday, April 6, 2023, marking a gain of about 35% in just one week and an N68.7 billion capitalization.
The sale was seen as strategic by investors and market participants who spoke with The Guardian about the development. They noted that Otedola is an experienced businessman who has previously been successful in generating value through comparable acquisitions.
Otedola is assuming a strategic position throughout the whole spectrum of the energy and power industries, according to Vice President of Highcap Securities David Adonri.
He claims that the business tycoon is currently putting into action a diversification strategy that would give him access to upstream petroleum holdings and also allow him to share in the wealth being generated by Transcorp Power Company.
According to Adonri, Transcorp is becoming fundamentally stronger with a definite indication of a better future. He emphasized how the firm’s situation has changed as a result of the transfer of authority to the concurrent list.
“In addition to Otedola’s ownership of a petroleum marketing company (downstream) and an electric power generating company, he is also a shareholder in the new Dangote Refinery (midstream).”
“For Transcorp, the stock is attractive now because its market value appears to be far below its long-term intrinsic value,” he said.
Patrick Ajudua, president of the New Dimension Shareholders Association, speculated that AMCON may have started selling some of the shares it bought from non-performing loans from banks and other businesses.
He claims that the assets that AMCON purchased through the purchase of non-performing loans are being sold off, enabling Otedola to make the most recent purchase.
He said that AMCON is today the owner of shares in numerous publicly traded firms, stating that these shares serve as security for the non-performing loans that AMCON bought a number of years ago.
“The shares to AMCON as a result of settlements/resolutions. AMCON would still offload all these shares if they want to finally exit and they have the right to sell their shares to anyone that declares interest to purchase.”
“He has entered as the second largest individual aside UBA nominees, it is a welcome development. That is the beauty of diversification, allowing people to come in and add value to the organisation.”
Moses Igbrude, the National Coordinator of the Independent Shareholders Association, added that AMCON owns stock in businesses that utilized their assets as collateral for loans during the banks merger.
“AMCON acquired those shares through debtors to banks. Those people who borrowed from the banks and could not pay have forfeited their shares, which is what AMCON is currently offloading,” he said.
Dr. Owen Omogiafo, president and group chief executive officer of Transcorp Group, said in a statement that the business welcomes any new shareholders even if it has not yet received formal notice of any pertinent interest in its shares.
“We welcome this expression of confidence in the leadership and management of Transcorp, as we continue our unwavering commitment to superior stakeholders’ returns, anchored in our ideology of Africapitalism.”
“We remain resolute in executing our Group’s strategy of making strategic investments in key sectors within the Nigerian economy, our transformation agenda and ability to contribute positively towards building prosperity,” she said.
Recall that Otedola had acquired N30 billion worth of the bank’s stock in October 2021 to become FBN Holdings Plc’s sole majority shareholder.
The management of FBN Holdings during the period confirmed that the business tycoon and his nominee, Calvados Global Services Limited, had acquired a total of 1,818,551,625 units of shares from the company’s issued share capital of 35,895,292,791. This is similar to how the Transcorp deal was developing.
Otedola increased his position during the bank’s leadership crisis, making him the single-largest shareholder of FBN Holding Plc.
Otedola was Transcorp’s second-largest stakeholder thanks to his ownership of the corporation.
Tony Elumelu, a billionaire who took over management of Transcorp in 2012, is the current owner of the company.
Elumelu, who serves as the chairman of Transcorp, is the owner of 273.1 million shares directly, 274 million shares through his Heirs Holdings Limited, and 294 million shares through HH Capital Ltd.
As of December 2022, only UBA Nominees owned around 9.25 percent of the firm; approximately 1,695 investors held roughly 89 percent of the company’s shares.