MONDAY, 23 AUGUST 2010 01:17 PHILLIP ISAKPA
A major shift in strategy is on the cards at Oando Group with a plan by the indigenous oil company to hive off 49 percent stakes in its marketing arm, Oando Marketing, to investors, BusinessDay learnt from capital market sources close to this arrangement at the weekend. In the 2009 financial result, Oando Marketing recorded sales in excess of N163 billion and posted profit of N5.8 billion.
According to the plan, in order to consolidate its leadership in all sectors of the oil and gas industry, Oando plc will restructure its business strategy with the divestment of about 49% of its stake in Oando Marketing.
Oando spokesperson last night declined comments advising “until all relevant approvals are in place.”This strategy was designed to “create investment opportunity for shareholders in the upstream and downstream [sectors of the business],” said one fund manager. The move will provide investment options to shareholders interested in guaranteed short to medium term returns in the marketing company. The strategy will also offer long term investment option through the company’s upstream business, Oando Plc, affording investors the opportunity to maximize risks through diversification. Indeed, a document seen by BusinessDay suggests a company upbeat about the value the new strategy will bring to investors.
“A new window of opportunity is available to shareholders by the alternative investment options, all from a Group with proven track record of impressive results in spite of challenging economic environment,” internal documents shows.
The eventual listing of Oando Marketing on the stock exchange will significantly alter the current classification of companies as the NSE will have to create a different category for Oando plc, the oil exploration and production business. That category could be called Energy, as the case on the Johannesbourg Stock Exchange, while Oando Marketing will remain under the petroleum marketing sector. Oando Group currently owns 100 percent of the marketing business, but BusinessDay learnt that the company will release as much as 49 percent to the investing public in Nigeria, a move that will eventually lead to the listing of Oando Marketing on the Nigerian Stock Exchange.
The move is likely to be interpreted by the market as a clear effort by the company to create an understandable distinction between its upstream and downstream businesses, as it continues to grow its oil exploration portfolio and with a marketing operation that has been on for 54 years.“What this means is that the creation of Oando Marketing plc from the group will favour shareholders who seek yearly dividends from a company that on its own will no longer be tied to the very long term nature of oil exploration and production business where investors often have to wait for that big pay day even while enjoying capital appreciation in the value of their shares,” said a fund manager at a leading investment firm.
Oando began its early life as Unipetrol Nigeria plc, an oil marketing company that was bought by Ocean and Oil Holdings led by Wale Tinubu, current group chief executive officer of the company, in 2000. In 2002, Unipetrol merged with Agip Nigeria plc after the former bought into Agip and the name was changed the following year to Oando.
Investors are likely to see a lot of value in the new strategy when the planned sale goes ahead. BusinessDay has learnt that the marketing business generates a cash flow of N500 million daily in sales and has been delivering profit yearly to the group under the leadership of Omamofe Boyo. But sources familiar with the kind of plan that Oando is trying to pull off say there are much wider reasons why this is the way to go for the company. Specifically, they say it offers some significant benefits to both the group and the marketing plc that will emerge.
“For the marketing business, the divestment strategy will provide a credible investment option for shareholders