A few days ago, the media was awash with allegations of back-stabbing between Nigerian billionaire businessmen, Femi Otedola and Tony Elumelu over the ownership of Transnational Corporation of Nigeria (Transcorp Plc).
Otedola had accused Elumelu of back-stabbing him and blocking his moves to buy Transcorp Plc for N250 billion.
In this interview with Arise TV monitored by MMS Plus, Johnson Chukwu, Founder and Managing Director, Cowry Asset Management Limited described what is playing out between the duo as a contest of pride while disclosing that the duo could have co-existed and propagated the course of the company with their wealth of experience and network of connections which would have been beneficial to the company. Excerpts
What Do You Make Of The Crisis Between The Duo Of Otedola And Elumelu On The Ownership Of Transcorp Plc?
It’s like a battle of billionaires, these two men are amongst the richest in the country, basically for me, it is a contest of pride if you consider the fact that Otedola has about 5-6 per cent equity in Transcorp until Elumelu came in to buy up the shares of Transcorp and build up the market price, the reality is that a 5-8 equity in Transcorp wouldn’t have made Femi Otedola a core investor in Transcorp, he can be a major investor but not a core investor.
For me, it is a contest of pride because the two of them could have co-existed as shareholders in Transcorp they should have brought in their wealth of experience and network of connections to even further the business interest of that company instead of the unnecessary contest of who would be the core investor.
Why Do You Think This Is Happening?
The core reasons why people invest in businesses is because of capital gain, dividend yield or to have controlling stakes in the business and throwing your influence around. If you have controlling stakes in a company, the benefit goes beyond your dividend and a directorship position, it also gives you a lot of leverage to influence the decisions of the company and also to take advantage, not necessarily as an insider trader, but in legitimate ways take advantage of the position. It comes with some benefits like helping people to get employment and stuff like that
In reality, in quoted companies, you might have more than one core investors, several quoted companies out there have more than one core investor.
In the outside world, you can invite your co-billionaires to come and co-invest in your company and you can all co-exist and come in with some competencies that can actually make the company do better.
But once in a while, you can see such conflict of interest as witnessed in the Elumelu and Otedola case and one of the parties could be asked to be bought out to avoid conflict between the two parties.
The Shares Of Transcorp Have Been On The Upside, What Do You Think Of This?
A couple of things can happen, the shares of Transcorp can increase significantly because of the volume of shares that Mr Elumelu has bought, so, the few stocks of Transcorp in the market now, retail investors are grappling to get hold of it.
Again, the company also has been returning impressive results of late, you could see that Transcorp Power just acquired Abuja Distribution Company, these are indications that the company may actually enjoy some stronger cash flow in the nearest future. So, investors are conscious of that.
These are some of the factors driving the good performance of Transcorp shares. Also, you now have a concentrated ownership of Transcorp unlike what we had before.
What Would Be The Fate Of Retail Investors Concerning The Crisis Rocking Seplat?
Retail investors are always worried about what to make out of situations like this. I mean, no one could have imagined that a court would have given the order to sack the Board of Seplat because orders like that are only given when the Board have been accused of fraudulent activities and not when the conflict is about the Managing Director is being accused of racism and then being asked to leave the country and revoking the expatriate license of the MD.
I do not think that as a market player or as an investor that such an infraction is sufficient to warrant sacking the entire board. So, investors are worried, and worried in instances when regulators appointed directors to supervise the affairs of companies will not augur well for such companies.
We’ve seen instances in the banking industry when regulators took over and appointed non-shareholders and non-stakeholders to superintend the affairs of companies, in many instances, the interest of the management shareholding are not aligned with the interest of shareholders. So, people are worried.
The good thing for Seplat is that they are still mining oil and producing gas, so, the nature of their business is not public opinion-sensitive because if Seplat were to be a financial company, the situation would have been different. But, because they are a real sector producing oil and gas, the horrible dance around their ownership has not really affected their production, otherwise, it would have been a different case.
Talking About Another Energy Company, Ardova Oil, What Is Your Take On The Arbitration Process That Awarded Otedola $19 million?
Sometime in July 2019, Femi Otedola said he sold about 74 per cent of the holding in Ardova Plc then Forte Oil to Abdulwasiu Sowami. Unfortunately, I do not know what transpired that led to them going for arbitration. But clearly, there was a commercial transaction at N66 per share, one would have expected that the acquirer or investor would have stayed to the terms of that acquisition.
I believe that there was some disagreement or some breach on the part of some of the investors that led Femi Otedola to go for arbitration and to get that award.
The basic thing for me is that, when people go into a contract and sign the dotted lines, they must have gone through the terms of that contract and must abide by it.
Oando Is Seeking To Buy Out Minority Shareholders And Exit The Stock Market, What Is Your Take On This?
We are beginning to see this too often. If you recall also that Ardova Plc which we just talked about made offers to buy out minority shareholders.
Now, we are talking about Oando is offering to buy off retail investors at about N7 per share. This is about to become a pattern where you have a very big person buy off a company, take the core investment in the company, and then seek to delist that company.
If we continue in that trajectory, we are going to see a few companies listed on the Exchange, this mean more company will delist from the Exchange which is a source of concern to retail investors as we are going to see few stocks available for trading and we will narrow the breadth of the market while all that we are pushing is to increase the number of quoted companies.
Now, we are talking about two of the biggest operators in the downstream sector is about to be delisted and for us as market operators, we are worried that this is becoming a trend as this will not augur well for market development.