Otedola to divest his majority shareholding within Forte Oil for $68.6m as he exits downstream sector

BILLIONAIRE businessman Chief Femi Otedola has announced plans to sell his 75% majority equity stake in Forte Oil in a deal estimated to be worth about N25bn ($68.5m) as part of a divestment programme involving the sale of non-core businesses.

Yesterday, Forte Oil yesterday confirmed that Chief Otedola is selling his full 75% direct and indirect shareholding in its downstream business. Within the Forte Oil Group, its downstream business accounts for more than three quarters of its operations, although the power generation business has consistently delivered higher margins.

Following the announcement of the news, Forte Oil’s share price rose by 9.84% or N2.80 to close at N31.25 per share on the Nigerian Stock Exchange (NSE).  In a regulatory filing signed by Forte Oil counsel Akinleye Olagbende, Chief Otedola is said to be divesting his majority equity stake to Prudent Energy, which will be investing through Ignite Investments and Commodities.

According to the company, Chief Otedola’s divestment from the downstream business is pursuant to his decision to explore and maximize business opportunities in refining and petrochemicals. Chief Otedola is a close friend of Alhaji Aliko Dangote, Africa’s richest man, whose multi-billion naira refinery is billed to commence operations within the next 25 months.

This divestment is expected to be concluded in the first quarter of next year subject to the receipt of applicable regulatory approvals and material conditions. It represents a major u-turn for Chief Otedola who had earlier in May secured shareholders’ approval to divest the group’s upstream services and power generating businesses as well as its downstream business in Ghana in a restructuring aimed at streamlining Forte Oil’s operations to focus on its Nigerian downstream marketing business.

Chief Otedola’s Zenon Petroleum and Gas Company and Thames Investment Incorporated are the major shareholders in Forte Oil, a legacy company that was privatised by the federal government. Forte Oil was incorporated in December 1964 as British Petroleum and became African Petroleum under the nationalisation policy of the federal government in 1979.

While details of the transaction are still sketchy, market analysts estimated the 75% divestment deal at about N25bn, in a straight-line, market-based fair value estimate. Forte Oil has traded at highest and lowest market value of N74.5nn and N21.74bn over the past 12 months and closed yesterday with a market value of N40.70bn.

Forte Oil Group includes the downstream parent company and three subsidiaries Forte Upstream Services, AP Oil and Gas Ghana Limited. It also includes Amperion Power Distribution Company, where Forte Oil holds a 57% majority equity stake.