Otedola reveals relationship with Transcorp shares, Elumelu
By Sodiq Adelakun
Nigerian businessman Femi Otedola has described his interest in the Transnational Corporation of Nigeria (Transcorp) as one driven by the need to unlock the company’s full potential and create value for shareholders.
Otedola made this clarification in his first public intervention in the recent battle for the soul of Transcorp.
According to him, “I offered to buy Transcorp Plc for N250 billion, but unfortunately, my offer was rejected,” Otedola said.
The billionaire recently divested his newly acquired stake in Transnational Corporation of Nigeria (Transcorp) to Elumelu, pulling the plug on the scramble for the top ownership of the group.
Otedola sold his substantial shareholding of 6.3 per cent, a haul of 2.6 billion shares bought in separate transactions, to Mr Elumelu.
However, in an analysis by an Integrated Communication Strategist, Sola oni, the embattled Head of State, set up the Odife Presidential Panel of Capital Market Reform, headed by late Chief Denis Odife. The primary agenda of the Panel was to incorporate the Abuja Stock Exchange obviously to stifle The Nigerian Stock Exchange through unfair competition.
Oni who was a Chartered Stockbroker and Commodities Broker, is the Chief Executive Officer, Sofunix Investment and Communications, said Abuja Stock Exchange came like a stillbirth as it was incorporated in 2000 and went live in 2001, when stock exchanges were merging globally because of the development in information technology. The Exchange’s Management tried to educate the Federal Government that multiple exchanges have become archaic.
After several failed attempts to fully commence operation, the Abuja Stock Exchange metamorphosed into Abuja Commodities Exchange and the Exchange has not been stable till date.
The last news heard was when Godwin Emefiele of the Central Bank of Nigeria (CBN) announced the Federal Government’s plan to sink N50 billion tax payers money as lifeline into the Exchange which has always contended with leadership problem.
The proposed capital injection was at variance with the calls from many quarters that the Federal Government should invest such a huge amount on infrastructure like the central clearing house that will benefit all the private-sector promoted commodities exchange such as Lagos Commodities and Futures Exchange (LCFE) and AFEX Commodities Exchange among others.
In 2021, the famous business mogul, Femi Otedola, hit the headlines for acquiring 7.57 per cent stake in FBN Holdings PLC., the Nigeria’s oldest bank. Otedola has earlier made peacemeal acquisition up to 5.07 per cent and finally topped it with another 2.5 per cent to hit 7.57 per cent to emerge single largest shareholder.
Otedola’s huge acquisition, a combination of direct purchase and use of nominees, pitched him against the Company’s incumbent Chairman, Hassan Odukale, who argued that his own stake was 5.36 per cent in the Bank. But through the intervention of NGX on the components of shareholding in the bank, it became clear that Odukale’s interest was 4.31 per cent.
The Bank reported 40 per cent slump in its after tax profit for nine months amidst the controversy. Ironically, its share price appreciated by 1.75 per cent following huge transactions on the stocks, apparently by the two key shareholders who were jostling for majority shareholder.
The Bank’s Audited Account for 2021 revealed that Otedola was the single largest individual shareholder and this doused the boardroom tension between him and Odukale. In June 2022, Otedola dumped about 844 million shares of First Bank , worth N9.2 billion and the Company’s share price nosedived by 13.4 per cent to a six -month low to close at N10.15 on June 10.
This was the absolute power of a high networth shareholder to influence share price movement at the detriment or benefit of other shareholders, depending on the price swing.
In April 2023, Otedola again literally rattled the Nigerian Exchange Limited (NGX), when the billionaire snapped up 6.3 per cent shares of Transnational Corporation of Nigeria (Transcorp) in separate deals and emerged the single individual largest shareholder in the conglomerate.
Miffed by the implication of this huge acquisition, the Transcorp’s Chairman and renowned global entrepreneur, Tony Elemelu, threw his investment hat in the ring and shored up his stake from 2.07 per cent to a whopping 25.9 per cent to retain his position as the single largest individual shareholder in the Company. This conferred more than a forth of the corporation’s voting right on him. However, on April 28 , Otedola sold his newly acquired 6.3 per cent holding to Elumelu ,believed to be gentleman’s agreement.
But in an interview published by some traditional and online newspapers, Otedola cited his controversial investment relationship with Elumelu since 2005, and traced it to 2012, lamenting his ordeal. He justified the rationale behind his decision to sell-off Transcorp shares 15 days after the purchase thus saying : As a businessman, i believe in healthy competition and market dynamics . Two captains cannot man a ship, and i respect the majority shareholder’s decision to buy me out. This is the nature of the game,” he said.
He explained that his original plan was to buy Transcorp for N250 billion. Market watchers believe that Elumelu shall tell his own side of the stories one day. As a fallout of the boardroom power play, the Transcorp’s share price which had earlier gained a record 173 per cent from the start of the year, fell by 9.9 per cent.
There is no doubt that the battle for controlling shares in a company is a double- edged sword. It can increase the fortunes of shareholders by way of capital appreciation or decrease it by share price depreciation, depending on the investment decision of the corporate raider at any given point.
In the case of Transcorp, they deployed greenmailing technique, whereby a greenmailer buys a substantial block of a company’s shares and threatens a takeover. Elumelu’s repurchase of Otedola’s shares in Transcorp is one way to tackle a hostile takeover. But Elumelu himself has by this strategy taken over Transcorp.
On April 16, 2009, The Exchange sanctioned a prominent stockbroker and Managing Director of Nova Finance and Securities, Eugene Anenih of blessed memory for allegedly purchasing the shares of African Petroleum (AP), for Alhaji Aliko Dangote through “manipulative and deceptive” devices of cross-trading.
By this transaction, AP lost 80 per cent of its share value between February 11 and March 24, 2009. Although Anenih was sanctioned by the capital market regulators, Alhaji Dangote was cleared when Anenih maintained that he did not receive instructions from the billionaire The ultimate losers were the innocent shareholders.
The shockwave that surrounded the transaction between Otedola and Elumelu on Trasncorp’s shares prompted some market watchers to accuse the Securities and Exchange Commission (SEC) and the Nigerian Exchange Limited of regulatory laxity with dire consequences on investor protection.
As this accusation lacked merit, the Commission had no direct role to play in such a secondary market transaction while NGX always enforced its Rule 17.13 “Prohibition of Market Manipulation and illegal Market Dealing.”
Many investors in Nigeria had lost huge amount of money in the primary market due to the failure of the promoters to deploy the money for the set objectives. As part of its rebranding, SEC has to put its house in order by reviewing all such outstanding sleazy offers and bring the promoters to book. This is the minimum the Commission can do to restore investor confidence in the market.
