Otedola sparks interest in Transcorp, shakes Elumelu’s controlling power

FEMI Otedola has aroused shareholders’ interest in the shares of Transnational Corporation Plc (Transcorp) with his recent acquisition of shares in the company, to initiate what could be quite some competition with Tony Elumelu for controlling power in the conglomerate.

Otedola had acquired 5.52 per cent or 2.245 billion shares of the overall total market volume of Transcorp, a transaction the company confirmed on April 20.

The Ibadan-born businessman had in addition upped his interest in Transcorp to 6.3 per cent in two separate notifications.

With the acquisition, Otedola is now a substantial shareholder of the company, becoming the second largest shareholder of the company behind UBA Nominees, which own about 9.25 per cent.

Before now, Transcorp was controlled by Tony Elumelu who took over control of the company in 2012.

While there are no offers in the market for Transcorp shares, The ICIR gathered that UBA Nominee (Tony Elumelu) had bought over two billion units of Transcorp shares last week.

The ICIR further gathered that a total of 1,055,408,604 units of Transcorp shares were done as off-market trade at N1.85k in five deals.

The deals were said to have been negotiated with United Capital Securities Limited as buyer and Regency Assets Management Limited and Renaissance Capital as sellers.

Prior to the recent development, Elumelu owned about 273.1 million shares directly in Transcorp, 274 million indirectly through Heirs Holdings Limited, and 294 million through HH Capital Limited.

As at December 2022, about 1,695 investors owned about 89 per cent of the company’s shares.

The latest tussle to control the ownership interest in Transcorp, analysts said, have not only caused a significant stir in the Nigerian financial market but has also spurred a flurry of market activity.

The share price of Transcorp has risen by about 75 per cent to N2.45 as at April 20 to emerge as the most traded stock on the floor of the Nigerian Exchange Limited (NGX) in the previous week, from N1.4 as at April 12.

Worthy of mention is that before Otedola’s recent investment, investors had shown little to no interest in Transcorp’s shares.

Otedola has caused an explosion in Transcorp that could be giving Elumelu some concern, the Executive Vice Chairman of Highcap Securities Limited, David Adonri, asserted.

“Transcorp is pure gold, a hidden jewel that people have not seen,” Adonri asserted.

Why Transcorp is a goldmine

The Transnational Corporation Plc is a diversified conglomerate with investments in the power, hospitality and energy sectors.

Founded in 2004, the company was listed on the Nigerian Stock Exchange (NSE) in December 2006, and trades under the name, Transcorp.

At present, its total market capitalisation stands at N99.59 billion with outstanding shares of 40.65 billion.

According to Adonri, former President Olusegun Obasanjo had set up the company to make it take the shape of the Japanese zaibatsu conglomerates, like Mitsubishi and Nissan, and to make it trade in vital sectors of the country with the mandate to develop assets like oil, agriculture, entertainment, and telecommunications.

Obasanjo had gathered young and sound entrepreneurs like Elumelu and Otedola to  invest in the company.

But while some others divested, Elumelu stayed put, driving the business, while Otedola did not leave completely.

“Transcorp, which sits on an upstream oil business, was making losses, and was not doing well until about a year ago when it started making profits.

“The profits have started escalating. Elumelu was looming large, until Otedola decided to come in to intensify his participation in the Transcorp shares,” the Highcap boss said.

He argued that Otedola might be out to play a strategy where he could leverage Transcorp for synergy in the power business.

“Apparently, Otedola is also trying to diversify its portfolios in the power sector, and in the energy sector along the upstream, midstream and downstream value-chain,” Adonri explained.

With his control of Geregu Power Plc and his stake in Dangote Refinery, Otedola already has a footing in the downstream and midstream markets, and strategically taking position upstream with his acquisition in Transcorp.

“The way he is moving now becomes a threat to Elumelu’ ownership of Transcorp that Elumelu has to start running from pillar to post for survival to defend his position.

“Since Tuesday (April 18), Elumelu has started buying Transcorp shares to increase his ownership of the business.

“Transcorp shares are pure gold, that is what Elumelu is keeping close to his chest, and is right now moving in to mop up from everywhere the stock is hidden.

“With the way they are mopping up and buying Transcorp shares now, there is a struggle for ownership of the business. It has dovetailed into a merciless struggle for the business,” Adonri added.

An investment and portfolio analyst, Abel Ezekiel, told The ICIR that what is playing out now was expected, saying Transcorp was undervalued.

Ezekiel recalled that the Transcorp stock sold at about N7, moved towards an all-time high of about N15 before it plunged to below N1 after the capital market crash in 2008.

As a conglomerate, the Transcorp share ordinarily is supposed to be one of the highly capitalised stocks at the Exchange. However, the reverse is the case considering it is below the initial public offer of N7 traded over the last 10 years.

He pointed out that though Transcorp owns Ughelli and Afam power plants, the company’s share still trades at a miserable price of N2, compared to Geregu Power Plc listed within the last three years and currently trading at almost N400.

“As an astute observation/investor, he (Otedola) must have seen untapped gold mines in Transcorp, thereby throwing his weight into the acquisition of majority shares of the company.

“So, as you may have noticed, the existing majority shareholder of the company, Tony Elumelu, cannot fold his hand and watch his compatriot, Femi Otedola, take over (through majority shareholder), Ezekiel said.

He added that Elumelu has to step up his own buying appetite, which would trigger the massive mop-up, and which would naturally be followed by price appreciation witnessed at the market in the past couple of weeks, “because we are talking of people who have deep pockets involved in this exercise.”

The investment analyst also expressed the view that the recent development was a good omen for the market ecosystem and minority investors, and could boost local investors’ interest in the market over their foreign counterparts.

“These are some benefits currently unfolding. So, we expect more of such opportunities to continue in the local burse,” Ezekiel added.

Who are these billionaires?

Otedola is a Nigerian with businesses in oil and gas, hotels, real estates and investments with a net worth of $1.8 billion, according to Forbes’ report of 2016 – the last time the publication profiled him.

The 61-year old businessman is the current executive chairman of Geregu Power Plc. In January 2006, he was appointed as a non-executive director of Transcorp, where he served till February 2011.

Also a Nigerian, Elumelu has a net worth of $700 million, according to Forbes’ report of 2015 when the publication last profiled him. The 60-year old entrepreneur is an economist and philanthropist. He chairs Heirs Holdings, United Bank for Africa, Transcorp, and is the founder of the Tony Elumelu Foundation.

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