EQUITIES WATCH
Goddy Egene writes that stakeholders are waiting for the value NIPCO will add to Mobil Oil Nigeria Plc, following its acquisition by NIPCO
The news of the acquisition of the 60 per cent shares of ExxonMobil Corporation’s stake in Mobil Oil Nigeria Plc by NIPCO Plc came to some capital market stakeholders as a surprise. The surprise was not that ExxonMobil divested its stake in Mobil Oil but what beats the imagination of some investors and stock market operators was the choice of NIPCO Plc. Although NIPCO is one of the leading integrated oil and gas firms in Nigeria, it is not very popular among investors and petroleum products consumers because of its limited spread.
Besides, the company is not listed on the Nigerian Stock Exchange (NSE) as such very little is known about its financial operations and capacity. However, the company was chosen by ExxonMobil to take over its stake in Mobil Oil. NIPCO had executed a Sales and Purchase Agreement with ExxonMobil on Monday 17th October, 2016 for the acquisition of the 216,357,157 shares.
The Acquisition
Following the signing of the sales and purchase agreement, the Chairman/Managing Director of Mobil Oil Nigeria, Adetunji Oyebanji said NIPCO was acquiring those shares for a consideration of $301 million subject to price adjustments for dividends and other factors. Considering the market capitalisation of the Mobil Oil, which stood at N87 billion at that time, NIPCO was acquiring the 60 per cent at a very high premium.
The Managing Director of NIPCO, Mr. Venkataraman Venkatapathy had said the company considered this acquisition an important synergy.
“It is part of our strategic move to support NIPCO’s continuous growth and expansion of its Nigerian retail footprint. We are confident of adding tremendous value to Mobil Oil Nigeria and likewise Mobil Oil will add a huge value to NIPCO. In furtherance of this value addition, NIPCO will continue to maintain the Mobil brand on its retail outlets as well as continue to blend and sell the Mobil brand of lubricants under Branding Licence (s) from ExxonMobil,” he said.
According to him, Mobil Oil will continue to run as a separate, distinct and independent company, from NIPCO Plc, each with its own CEO who will report to its board of directors.
“In furtherance of this transition, Mobil Oil will continue to maintain the Mobil brand at its retail outlets as well as blending and selling Mobil brand of lubricants under branding licensee (s) from ExxonMobil. In essence Mobil Oil will continue as usual and therefore the change should be smooth and seamless,” he added.
Venkatapathy expressed profound gratitude and appreciation of NIPCO to ExxonMobil for selecting the company as the preferred bidder for the acquisition of the shares.
“We wish to give every assurance to ExxonMobil that having entrusted us with this invaluable asset (Mobil Oil), we will ensure full brand compliance with ExxonMobil’s global standards as well as rigorously sustain and follow ExxonMobil’s code of conduct/ethos and operational excellence,” he said.
Concluding the deal
The process of consummating the acquisition was concluded late March following the crossing of shares to NIPCO on the floor of the NSE. While the Securities and Exchange Commission (SEC) approved the deal, Cordros Securities Limited acted as the execution stockbroker to both ExxonMobil Oil Corporation and NIPCO Investments Limited for this transaction.
Market operators sad NIPCO’s acquisition of the majority stake in Mobil will serve as a significant breakthrough, which could bolster investors’ confidence and appetite in the sector, following the deregulation initiative of the Federal Government of Nigeria in the downstream oil and gas industry.
“Also, this strategic move by NIPCO will ensure the continuous growth and expansion of its Nigerian retail footprint, increase efficiency gains (economies of scale) whilst adding tremendous value to the downstream sector as a result of this notable transaction,” an operator said.
Following the acquisition 60 per cent acquisition, NIPCO is required by the Investment and Securities Act, to make a takeover bid to all minority shareholders of Mobil Oil Nigeria Plc.
Already, the Board of NIPCO is said to have already made an application to SEC for a takeover bid of minority shareholders stake in Mobil Oil and has received SEC’s “Authority to Proceed” with the takeover bid at the same price of N417.12 the acquisition was carried out.
NIPCO Assures Stakeholders
While investors are waiting to see what will become of their investments in Mobil in the years ahead, Venkatapathy has assured them that they will benefit from the acquisition of Mobil Oil Nigeria Plc.
Speaking during a visit to the floor of the NSE the NIPCO boss said he was confident that investors would benefit greatly from the deal, noting that improved performance of the company as an integrated oil firm remains their priority objective.
“As efficient oil marketing company, NIPCO acquisition of MOBIL majority shares would bring economy of scale to the firm, benefit Nigerians and grow the economy. We would be adding new businesses and works towards increasing the production of its lubes which has remained a cherished brand in the lubricant market,” he said.
The MD boss explained that to all discerning investors the deal is a big welcome to a new dawn and new era that will usher in stability, prosperity, sustainability and growth in the downstream sector in particular and the industry in general.
According to him, the acquisition, which marks their avowed resilience of the Nigerian economy will no doubt enhance the continuous growth and expansion of their retail footprint in Nigeria as well as increase value and confidence to investors.
“The deal will definitely make the NIPCO group bigger not only due to the acquisition but also the additional new business lines to be introduced to make the company one of the most proficient and best run out fit in the industry. The group overall goal is to increase Mobil presence and efficiency across the nooks and crannies of the country and expand its retail footprint to a minimum of 300 at the earliest and make it a vibrant one,” he added.
Ventakapathy also assured the NSE and all other regulatory agencies that the expected due diligence will be implemented to the letter in all the company’s transactions in the market and further spur investors’ confidence in the new management of the company.
He disclosed that in the landmark agreement signed with ExxonMobil, NIPCO would continue to use the Mobil brand and also continue to market Mobil lubricants.
Financial Performance
A look at the financial performance of the two companies showed that Mobil Oil has been operating more efficiently given its profit margin. It is a profitability indicator, which measures how much of revenue is end up as profit for the company based on its cost management efficiency.
And for instance, for the year ended December 31, 2015, NIPCO’s profit margin was 1.2 per cent, while that of Mobil Oil was 7.4 per cent.
Specifically, NIPCO Plc reported a revenue of N115 billion for 2015, showing a decline of 20 per cent from N145 billion in 2014. Profit after tax fell from N2.31billion in 2014 to N1.42 billion in 2015, showing a profit margin of 1.2 per cent in 2015.
On the other hand, Mobil Oil ended 2015 with a revenue of 64.2 billion and profit after tax of N4.8 billion, leading to a profit margin of 7.4 per cent. In 2016, the company improved its revenue to N94.1 billion while profit stood at N8.1 billion, translating to profit margin of 8.6 per cent.
As NIPCO takes over the operations of the company, stakeholders are awaiting how Mobil Oil performance will be in the years to company.
