By Chinwendu Obienyi

Following the approval of the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE), it is no longer news that NIPCO Investments Limited has completed the acquisition of stake in Mobil Oil Nigeria (MON) Plc.

The deal, worth N90 billion, was executed on the floor of the NSE recently and is one of the biggest in the downstream sector in recent years.

Following the successful acquisition of 60 per cent of Mobil shares, NIPCO is required by the Investment and Securities Act, to make a takeover bid to all minority shareholders of MON.

Sources disclosed that the Board of NIPCO had made an application to SEC for a takeover bid of the minority MON shareholders’ and as a result, received SEC’s “Authority to Proceed” with the takeover bid at the same price of N417.12.

The Managing Director of Mobil Oil Nigeria, Adetunji Oyebanji, said that NIPCO was acquiring those shares for a consideration of $301 million subject to price adjustments for dividends and other factors.

On the other hand, Managing Director, NIPCO, Venkataraman Venkatapathy, said the company considered this acquisition an important synergy. He said, “it is part of our strategic move to support NIPCO’s continuous growth and expansion of its Nigerian retail footprint and we are confident of adding tremendous value to Mobil Oil Nigeria and likewise, Mobil Oil will add a huge value to NIPCO.

Investors in the stock market are still amazed at the turn of events and there have been headaches as to whether their confidence in the market can still be sustained and what they stand to gain or lose following the acquisition, considering that the shares of Mobil are trading at N300 on the stock market, thus standing at 40 premium to the existing shareholders.

According to market operators, NIPCO’s acquisition of the majority stake in Mobil will boost investors’ confidence and appetite in the sector, following the deregulation initiative of the Federal Government in the downstream oil and gas industry.

Speaking during a visit to the floor of the NSE, Venkatapathy expressed confidence that investors would benefit greatly from the deal, noting that improved performance of the company as an integrated oil firm remains their priority objective.

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“NIPCO acquisition of Mobil majority shares would bring economy of scale to the firm, benefit Nigerians and grow the economy, thus, we would be adding new businesses and work towards increasing the production of its lubes, which has remained a cherished brand in the lubricant market.

“This 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,” he said.

He also assured the NSE and all other regulatory agencies that the expected due diligence would 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. In terms of dividends, some argue if NIPCO will increase or reduce

dividend irrespective of the fact that NIPCO has been paying dividends every year to its shareholders since 2004.

“Currently, dividend stands at 300 kobo to each shareholder. This portends well for shareholders based on the fact that NIPCO adopted a policy in 2007 to increase dividend every year by 25 kobo, so I see no reason why NIPCO won’t do better in terms of dividend,” Olayemi Dada, a NIPCO shareholder said.

Further analysis of the financial performance of the two companies showed that Mobil Oil has been operating more efficiently given its

profit margin. 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.

Market operators, however, remain confident that the margins will increase considerably, noting that NIPCO will deliver and add value to the downstream.

“This strategic move by NIPCO will ensure the continuous growth and expansion of its Nigerian retail footprint, increase efficiency gains (economies of scale) while adding tremendous value to the downstream sector as a result of this notable transaction,” an operator said.