What It Means As Otedola Acquires Major Stake In FBN Holdings

Otedola has acquired major stake in FBN Holdings.

According to The Nation, in one of the transactions, Otedola was believed to be the proxy buyer in a N7.57 billion cross deal at the Nigerian Exchange (NGX) Limited on October 07, 2021.

Business magnate and investor, Mr. Femi Otedola, has acquired a material shareholding in Nigeria’s oldest banking group, FBN Holdings (FBNH) Plc.

Otedola in a series of secondary market transactions and negotiated deals was confirmed to have acquired more than five per cent equity stake in FBN Holdings, the parent holding company for First Bank of Nigeria (FBN) and its former subsidiaries

Nigerian capital market rules set a threshold of five per cent for “material” or significant shareholding, which must be disclosed to the regulatory authorities and the board of the affected company.

Sources in the know and dealers at the stock market confirmed that Otedola might have acquired more than two billion ordinary shares of 50 kobo each in FBNH in a series of secondary transactions that heightened with a major cross deal two weeks ago.

FBNH, one of the companies with the widest and diverse shareholding base, has total issued share capital of 35.895 billion ordinary shares of 50 kobo each.

In one of the transactions, Otedola was believed to be the proxy buyer in a N7.57 billion cross deal at the Nigerian Exchange (NGX) Limited on October 07, 2021. A total of 473 million shares of FBNH were crossed at N16 per share, significantly above the market price. The transaction was registered as a “negotiated cross deal” by FBNQuest Securities Limited, implying that the deal was already concluded between the parties and was merely taken to the market to formalise the transaction.

A Marina, Lagos-based stockbroking firm also confirmed to The Nation that it sold several millions of shares to Otedola in multiple secondary market transactions, deals that popped up the firm and FBN Holdings as largest dealer and most active stock in recent days.

Some of the deals included shares held by an estranged long-standing director of the group, who lost a major boardroom squabble recently and under regulatory review.

But all market pundits were unanimous that the aggressive acquisitions by Otedola would not lead to any material changes in the board and management of the banking group. They noted that Otedola’s holding falls short of majority shareholding as the traditional alliance that runs the banking group still has controlling equity stakes.

With no outstanding majority shareholder, FBNH has been run by a longstanding, time-tested traditional alliance of several shareholders with major shareholdings who traditionally pool their holdings through proxies to sway major decisions including board and management appointments. That alliance was tested recently during a boardroom squabble and it fended off what was described as “undue” influence.

Latest audit showed that while no individual shareholders held more than five per cent equity stake, some 40 shareholders held more than 30 per cent equity stakes, in an informal alliance that uniquely sustains the diversity of the banking group, despite emergence of core majority shareholders in other first generation banks.

Checks with the regulators indicated that Otedola has not formally filed required disclosure to initiate the market of his shareholdings status at the FBNH

A source at the Nigerian Exchange (NGX) said the regulator was still engaging the parties and reviewing details of transactions. Another source said the regulators were reviewing timelines and thresholds of transactions to ensure that the acquisition complied with extant regulations that require disclosure of material acquisition within a specific timeline.

Market pundits said the acquisitions by Otedola would possibly lead to no changes in the FBNH citing corporate governance structure at the banking group, diverse shareholding and Central Bank of Nigeria (CBN)’s regulations. As against other non-financial institutions, CBN reserves the primary approval right for any appointment unto the board and management of a regulated financial institution.

“This is not like the case of Forte Oil, he was practically the owner of Forte Oil but he is not holding the majority shares in FBNH, and I don’t think he has the financial muscle to attain a clear single controlling equity stake,” a source, who is a dealer and chief executive at the stock market, said.

While the board of the FBNH has not issued any official statement, a source close to the directors said there was no indication of any takeover, allaying fears of any possible major changes in the board and management of the group.

Otedola’s current shareholding falls short of the regulatory requirement for a tender offer, which could have allowed the business magnate to make exclusive sweetened offer to the general investing public.

Section 131, Part XII of the Investment and Securities Act, No. 29, 2007 and Rule 445 of SEC Rules and Regulations, 2013 make it mandatory for any institution or person that acquires at least 30 per cent of a company to make an mandatory tender offer (MTO) to other minority shareholders. There are however exemptions in few instances.

Otedola had in June 2019 sold its majority shareholding in the then Forte Oil Plc in a deal valued at about N64 billion. Ignite Investments and Commodities Limited led by Prudent Energy Services Limited had in June 2019 completed the acquisition of 74.02 per cent majority equity stake in Forte Oil from the company’s erstwhile chairman, Otedola.

The new core investor then appointed a six-man board to replace the eight-man board led by the erstwhile chairman and majority core investor, Otedola. Mr Abdulwasiu Sowami replaced Otedola as the chairman of the board of directors of the company while Mr Olumide Adeosun replaced Mr Akin Akinfemiwa as the chief executive officer. Sowami is the chairman of Ignite Investments and Commodities Limited and founder and chief executive officer of Prudent Energy Services Limited.

Otedola had in December 2018 in a dramatic twist announced plan to sell his 75 per cent majority equity stake in Forte Oil to Prudent Energy, which was investing through Ignite Investments and Commodities Limited. Prior to this announcement, Otedola-led board had secured major approvals on a long-term growth and financing plans for the energy group.