Boardroom politics and takeovers are hardly a standard fare in the arcane business world. Therefore, they arouse public curiosity when the dealings spill into the public domain. This scenario played out in the case of two powerful Nigerian business tycoons, Femi Otedola, Executive Chairman, Geregu Power Plc and Tony Elumelu, Chairman, Transnational Corporation of Nigeria (Transcorp), who went toe to toe in a complex contest for the control of the Transcorp with a huge war chest.
This battle began around mid-April 2023 when Otedola ventured into Elumelu’s territory by acquiring 5.52 per cent ownership of Transnational Corporation (TransCorp).
The acquisition cost Otedola N3.14 billion (based on the share price of Tuesday, April 11, 2023) and made him one of the major shareholders in TransCorp.
Immediately the acquisition made headlines, analysts predicted a hot chase at Elumelu who had the controlling shares of the diversified investment firm and also chaired the board.
Although Elumelu had welcomed the investor in a manner that suggested he believed in “the more, the merrier”, attitude, subsequent events showed it was really not so.
Within a few days, Elumelu fought back by acquiring an additional 9.7 billion shares in separate deals to ramp up his combined stake in the group to 10.5 billion shares, or 25.9 percent, cementing his position as Transcorp’s main shareholder.
Otedola eventually sold his TransCorp shares with a premium to Elumelu, putting an end to the drama that had played out. But it did not come that easy.
THE TRUCE
Authoritative sources revealed that a truce was brokered by influential personalities in the business and political circles, including mutual friends led by Africa’s richest man, Aliko Dangote.
By that intervention, the battle for the ownership of Nigeria’s biggest conglomerate between two of Nigeria’s finest business tycoons, Elumelu and Otedola, finally came to an end as Otedola sold his TransCorp shares with a premium to Elumelu, putting an end to an intriguing corporate drama that has shocked, rocked and rolled Nigeria’s capital markets over the past several days.
According to multiple sources, the two businessmen share many mutual friends which made it possible for the battle for the soul of Transcorp to be brought swiftly under control.
Sources familiar with the matter revealed that when the news first surfaced about two weeks ago, Dangote and other members of their shared social circle began to put pressure on Otedola to abandon his lofty goal of carrying out a hostile takeover of TransCorp, which was Otedola’s original plan. He brushed aside the advice.
Sources close to Otedola confirmed that the chairman of Geregu Power was keen on wresting control of Transcorp from Elumelu and was eyeing its lucrative power assets in addition to using the company to take over a sizeable chunk of the growing electricity sector.
For Elumelu, the idea was a wake-up call. Despite the fact that both men share close relationships and call each other brothers, Elumelu was not aware of the move by Otedola to invest in TransCorp as he woke up to the news, just like many others did. He moved fast.
He was said to have invited members of the board of Transcorp to a virtual meeting. As sole administrator to the meeting, he allegedly locked out Otedola and prevented him from making a presentation and contribution to the meeting.
A privileged source, who enjoys proximity to the two billionaires, claimed on the condition of anonymity that, as a way of settlement, Elumelu made an offer and paid Otedola a 400-percent premium on Transcorp’s closing price on the night of the deal, to acquire his bloc of shares.
This would mean that Otedola, who owned 2.6 billion shares, or 6.3 percent of the company, was paid somewhere in the neighborhood of N12.5 per share and walked away with N32.5 billion.
BACKGROUND TO THE ‘WAR’
While Otedola’s publicly traded Geregu Power has one power plant in Kogi State with an installed capacity of 435 MW and boasts a market cap of more than $1.6 billion, TransCorp has two power plants in Delta and Rivers States with a combined capacity of over 2,000 MW, but its market cap sits at less than $300 million.
Analysts had for long maintained that Transcorp was significantly undervalued.
Otedola purchased the underperforming state-owned power asset in 2013, Geregu, with an effective capacity of less than 100 megawatts (MW), and increased its capacity to 435 MW, with 70–80 percent of the power generated being supplied into the grid.
Geregu Power, whose shares have doubled in just six months, recently paid out N20 billion in dividends to its shareholders for the 2022 fiscal year.
Transcorp’s stock, on the other hand, had perpetually languished in the neighbourhood of N1 per share for years, with lacklustre dividends paid over the past few years.
Otedola had already started making demands for board seats on TransCorp’s board and was still buying shares in the company every day at the time he moved into the battle for Transcorp with Elumelu.
REACTIONS WITHIN THE SECTOR
Capital market sources said the battle of huge war chests between Otedola and Elumelu was akin to a Greenmail, which hinges on a hostile approach to take over a target company.
“Greenmail or greenmailing is the action of purchasing enough shares in a firm to challenge a firm’s leadership with the threat of a hostile takeover to force the target company to buy the purchased shares back at a premium,” Dr Paul Uzum, stockbroker had told this newspaper, while confirming that the power play between Otedola and Elumelu had a deeper aspect.
National Coordinator, Pragmatic Shareholders Association, Mrs Bisi Bakare, said the capital market is a free place where people can invest and divest at will. She disagreed that a power play exists in the Otedola-Elumelu transactions.
However, a highly-placed capital market source, who craved anonymity, said, “We have not seen it all until we hear Elumelu’s narrative.”
Uzum had said the development should be taken with some ‘caution’, as there might be more to what was in the public domain.
Speaking on the Otedola-Elumelu feud, Uzum said there could be more to the development than what was at public display because the equities market is a complex ecosystem.
“There is a lot about the equities market. It is deep and complex. Those who put their huge money in that place are not just ordinary people. Investments could be more than what we see. I do not mean the market operates in a suspicious way. What I mean is that it is deep and complex. We may not be seeing the whole story,” Uzum told THEWILL in a note.
Uzum’s position seems to have been confirmed with recent revelations by Otedola, accusing Elumelu of backstabbing him and cashing in on his most vulnerable moments in business.
Otedola has sold 2.8 million units of his shares in the Geregu power generation company, where he is holding the majority stake. According to data from the Nigerian Exchange, he offloaded the shares via two transactions executed on different dates.
The transaction documentation showed that the first sale batch involved 1.9 million shares sold at N288.9 each on May 8; while the second was 948,092 shares sold at N290.7 per unit
The deals were sealed on May 9, according to a regulatory filing with the Nigerian Exchange, and both summed up to N817.3 million.
A separate share dealing document at the Nigerian Exchange on Wednesday showed that Paul Olurotimi Otedola, the sibling of the energy tycoon, procured 300,000 units of the company’s shares at N288.9 per unit on May 8.
Paul Otedola’s interest in the company now totals 4 million shares, having acquired 3.7 million shares earlier this year at N809.2 million.
THEWILL recalls that Otedola had divested his 6.3 percent substantial stake in Transnational Corporation Plc, a conglomerate with interest in power generation, to Elumelu after a week of off-market share purchases.
A top stockbroker, who did not want his name disclosed, told THEWILL last Thursday that the disposal of Otedola’s shares in Geregu Power was a strategy nobody could explain in view of the “battle for financial supremacy between him and Elumelu”. Other sources however said it was a way of empowering his brothers.
ELUMELU CONSOLIDATES
Unmoved by the public accusations by Otedola, Elumelu, as chair of Transcorp Power, on Monday, received the discharge certificate of the Ughelli power plant from the Bureau of Public Enterprise (BPE).
The discharge came one month after the National Council on Privatisation approved the recommendations of the BPE that Ughelli Power Plc be delisted from routine monitoring, having satisfied five core post-acquisition requirements.
The requirements include available capacity, capital expenditure, human resources, health, safety and environment and corporate social responsibility.
Commissioned in 1966 with an installed capacity of 972MW, the Ughelli Power Plant, whose capacity had dropped to 300MW, became an asset of Transnational Corporation of Nigeria Plc in 2013 under the company’s power subsidiary, Transcorp Ughelli Power Limited.
Transnational Corporation (Transcorp) is on the verge of increasing its share of the Nigerian electricity market, following the pre-qualification of its power subsidiary, TransCorp Power, to acquire the Abuja Electricity Distribution Company (AEDC).
When the transaction finally closes, the corporation will add the power distribution firm to the previously owned TransAfam, a generating company with an installed capacity of 1,000mw.
Vice-President Yemi Osinbajo hinted at the pre-qualification at the Tuesday inauguration of the 240-watt Afam 3 power plant in Rivers State, stating the National Council on Privatisation (NCP) had formally approved TransCorp Power Consortium as the preferred bidder for the Abuja Disco.
According to observers, the acquisition will make the Abuja power firm to focus on better service delivery to its customers. It will also make TransCorp Power, a real competitor in the power sector.
Although details of the bidding for AEDC are still sketchy, sources at the Bureau of Public Enterprises (BPE) said it would be made public in the coming days.
The path to the soul of AEDC by Transcorp is made easier by the December 2021 take-over of the power firm by the United Bank for Africa, a bank that is chaired by Tony Elumelu, who also chairs the TransCorp Group, over the inability of its core investor, Kann Consortium to service the $122 million debt it owed the bank.
Kann Consortium secured a loan in 2013 from the UBA to acquire the Abuja Electricity Distribution Company (AEDC) during the privatisation programme, making it the core investor with a 60 per cent stake.
In April 2023 however, the bank said it would be selling the AEDC to recover the $122 million debt.
AEDC’s franchise area covers the Federal Capital Territory, Niger, Kogi, and Nasarawa States with a total land mass of 133,000 square kilometres. Its addition to the TransCorp basket will move the conglomerate to live its vision, which is to take over the market space from foreign firms and make money for Nigerians by providing the needed services.
KEY POINTS
The speed of the transaction which, perhaps, is to block incursions from outsiders and also consolidate TransCorp’s position in the power sector, is seen as a response from Elumelu to Otedola, who accused the former of backstabbing him.
Otedola had also said he offered N250 billion for shares of TransCorp last month to unlock the corporation’s full potential and create value for shareholders, but his offer was rejected.
Events of the last month, up to the present day, have turned TransCorp into a bull in the market, having survived the scare of take-over by Otedola, an action that has pushed its board and management to move stealthily to increase its share of the electricity market in Nigeria.
Within days, it received the discharge certificate from the NCP, followed it up with the commissioning of the Afam 3 power plant and the latest, which is the pre-qualification to buy the AEDC.
As if summarising it all, Osinbajo had said, “I can say that the last few days belong to TransCorp Power because, at the meeting of the National Council on Privatisation, TransCorp Power Consortium was approved as the preferred bidder of the acquisition of the Abuja Electricity Distribution Company.
“Only on Monday, the NCP formally delisted TransCorp Power Plc, formerly known as Ughelli Power Plc, from routine monitoring and evaluation by the Bureau for Public Enterprise (BPE), indicating yet another successful power investment.”
The major problem of the country’s power sector is inadequate cash injections, and it is believed that the relationship between TransCorp and UBA will provide the required solution in this regard.
The Central Bank of Nigeria (CBN) has also tried in this area, supporting the sector in five years with N1.3 trillion as of March 2022 through its various intervention programmes. However, investors in the sector are now expected to inject new money for a better industry.
Osinbajo lauded the TransCorp Group for its incursion into the market stating, “From the time we started, indigenous firms like TransCorp Power and Heirs Holding have been making significant investments, such as this 100 per cent acquisition of Afam Power Plc and Afam Three Fast Power Limited, jointly referred to as Afam GenCo’.
OTEDOLA MOVES ON
Earlier this year, Otedola sold five percent of Geregu Power to Africa’s supranational bank, Africa Export and Import Bank (Afreximbank). According to a document released on February 21, 2023, Africa Export and Import Bank bought the shares through its subsidiary, Fund for Export Development in Africa (FEDA).
Fund for Export Development in Africa, which is an impact development unit of the bank, concluded the share acquisition on Tuesday, February 21, 2023.
The shares were acquired five months after Otedola listed the shares of Geregu Power on the stock market of the Nigerian Exchange Limited (NGX) in October 2022.
Fund for Export Development in Africa announced last year that it intends to acquire a strategic minority stake in Otedola’s firm.
FEDA said the investment would help to develop the electricity industry through Geregu Power, which is eyeing one of Nigeria’s national assets.
In the document announcing the acquisition, Geregu wrote: “Geregu Power Plc (the Company) hereby notifies the Exchange and the investing public of the purchase of 5 per cent of its shares by the Fund for Export Development in Africa (FEDA). FEDA is the impact development arm of the Africa Export and Import Bank (Afreximbank).
“The purchase of the shares was concluded today the 21st of February 2023 with the purchase agreed on the 21st of December 2022. With this purchase FEDA now currently holds 5% of Geregu Power Plc Shares.”
The noted disclosed that Geregu was planning to acquire one of the power generation companies on sale from the Bureau of Public Enterprises (BPE).
It said BPE was weighing bidders for the sale of five National Integrated Power Projects (NIPPs), one of which is Geregu Generation Company Limited located in Kogi State.
Otedola’s investment vehicle, Amperion Power, the majority shareholder of Geregu Power Plc, is eyeing the Geregu Generation Company to expand the current Geregu Power capacity.
However, Otedola’s recent revelations suggest that the cold relationship between the two associates has deepened, even as they each consolidate their businesses.
When people thought the ‘hostility’ was over and could be spoken of in past tense, a new vista opened when Otedola went public to expose the anatomy of his relationship with Elumelu spanning about two decades.
In his first public intervention in the recent battle for the soul of TransCorp last Wednesday, Otedola accused Elumelu of backstabbing him and being in the trail to pull him down. Otedola made reference to various alleged acts of backstabbing by Elumelu dating back to 15 years.
In his recent revelations widely circulated in the media, Otedola opened up on how he went bankrupt in 2008 and was allegedly betrayed by Mr Elumelu.
Otedola revealed that he became Chairman of TransCorp Hotel in 2007 with a shareholding of five per cent and unknown to him, Elumelu gradually started buying shares quietly.
He went further to adduce that in 2008 he went bankrupt in Nigeria and Elumelu proceeded to take his shares in UBA to service the interest on his loans “and he also took over my shares in Africa Finance Corporation where I was the largest shareholder.”
Otedola said, “Shortly after, Albert Okumagba informed me that an American firm wanted to acquire my shares in TransCorp, which I then agreed to sell. However, this supposed American firm turned out to be Tony Elumelu. The revelation of this prompted me to resign as chairman of the hotel.”
The businessman also alleged that in 2012, he told Mr Elumelu about his interest in the Ughelli power plant and the TransCorp chair “quietly went ahead” to outbid him in the acquisition of the plant.
“Years later, in 2012, Tony said he wanted to see me. So we met in my office where I had previously had a meeting with some foreign investors who had not yet departed the premises,” he had explained.
“Curious to know, he asked what sort of meeting I had just had and I disclosed that I wanted to go into the power business, specifically Ughelli Power Plant. Tony quietly went ahead to bid for Ughelli and he outbid me by offering to buy the plant for $300 million,” Otedola revealed.
Efforts to reach Elumelu for comments were not successful as he did not respond to calls and text messages sent to his phone. When contacted, Otedola said the matter is now an ‘old story’.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
