Transcorp Plc: Between Otedola, Elumelu
The recent short-changed battle for control at Transcorp Plc has proven that it’s close to impossible for two strategic billionaire investors to co-exist. Don’t hate the players, hate the game.
Before the fact emerged, MarketForces Africa wrote that Femi Otedola’s investment in Transcorp Plc shares was agenda driven. Of course, no Broadstreet geek expects Tony Elumelu to give up easily after so much effort has been put into turning Transcorp Plc around.
Years after it came to the stock market at N7.30, Transcorp’s share is trading below N3 and the company has a weak dividend payment record.
Otedola’s early exit wasn’t an act of cowardness when it comes to investing but he has an understanding of the game – he tested the water and felt how distasteful his ambition could cost a friendship gesture from a billionaire ally.
Heir Holding capital retaliation with a large acquisition of Transcorp shares speaks volumes about corporate control and very much about how billionaires guide their empires with all jealousness.
For non-controlling shareholders, capital gain and periodical dividends are okay. For strategic investors, that is just a part. Sometimes, a seat on the board is not even enough but actual control.
Broadstreet analysts who have observed Otedola’s investing pattern would know the billionaire would not play second fiddle in Transcorp. That attitude alone informed his early exit when the signal on the wall appeared so clear that Heir holding Chairman is willing to fight back.
Both billionaires can never co-exist on the same company and it would be dumb to think Elumelu will cede control to the billionaire competitor, and ‘dumber’ to think Otedola will play second fiddle in Transcorp.
Elumelu’s decision to mobilize capital to reclaim influence, and Otedola – whether by choice or by force sold out its interest to avoid a clash of the titans in the Broadstreet.
Ordinarily, one would wonder what is in Transcorp that attracts their separate interest. A number of equities investors would not buy Transcorp shares if recommended by their stockbrokers.
Historically, the conglomerate has been a non-performer. The question now is: what did Otedola spot in the conglomerate following Elumelu’s touch?
Whether anyone likes it or not, Transcorp Plc carries Elumelu’s signature imprints on its performance. The question again is: How is Transcorp standing, gauging its key performance metrics?
As risk takers, Otedola, and Elumelu understand the higher the risk, the better the return from placing a bet on a company like Transcorp –even while the company’s profit still trails guidance for the current year.
It is amazing how Transcorp, has evolved over the years. The conglomerate had been written off because of constant non-performance until the baton of leadership changed hands.
Without mincing words, the conglomerate feels Elumelu’s management dexterity, industries wide experience, and market intelligence.
It would be recalled that since 2007 when the group approached the market to raise equity, the conglomerate has only paid dividends a few times.
Those early risers, wannabe shareholders who picked the shares of the company did so for dividend expectation and capital appreciation – but none of these came until much later when it switched into a recovery mood.
So, there is no how street investors would have been able to recoup an investment in Transcorp; a conglomerate with 40.6 billion outstanding shares.
For the first 10 years, investors gained nothing – in dividends and capital appreciation. Many would surely remember Transcorp Transnational Incorporation as one of the overhyped Initial Public Offerings in Nigeria –ever!
Some investors, both wannabe and those that have their fingers glued to picking stocks; wished they didn’t go along with Transcorp.
For decades, the stock has consistently underperformed in the market. Now, the tide is reversing as Transcorp earnings started maintaining a year-on-year uptrend.
Recently, Transcorp Plc joined dividend-paying leagues under Elumelu’s leadership – and that is the first time a beam of hope beckons. It may be about time to anticipate again as its directors proposed to pay a 5 kobo dividend on each share. Also, the company’s numbers have started looking good.
It is actually better compared to what the market used to have. One of the most diversified corporate entities in Nigeria has been some assets spin-off.
Underperforming subsidiaries are also undergoing restructuring or at best repackaging.
Femi Otedola, the billionaire businessman, says he offered to acquire Transcorp Plc for N250 billion and take the company’s market capitalisation to N2 trillion but his bid was rejected.
Recently, Otedola acquired a 5.52 percent stake in Transcorp Plc to become the second largest shareholder of the company but then sold out his entire holding to Tony Elumelu, the chairman of the group.
Elumelu had said he welcomed Otedola’s investment in the company and looked forward to working with him, adding: “He’s my very good friend. In fact, I only follow two people on Instagram, my wife, and Femi Otedola… that shows the level of friendship we have.”
In a press statement he shared with TheCable on Tuesday morning, Otedola spoke for the first time on the events surrounding his bid to take over the company.
He went down memory lane on his relationship with Elumelu and his plans for Transcorp before he opted out because his bid was rejected.
“In 2005, while Tony was the Managing Director of Standard Trust Bank he approached me to get funds to acquire UBA. I enthusiastically gave him $ 20 million, which was N2 billion at that time to buy the necessary shares in UBA for the acquisition.
After a short period of time, the share price moved up and I decided it is was a good moment to sell and get out of the bank. However, Tony appealed to me to hold on to the shares as he was convinced that there were future prospects – so I kept the shares,” Otedelo said.
“I became Chairman of Transcorp Hotel in 2007 with a shareholding of 5% and unknowingly Tony gradually started buying shares quietly.
“By the following year in 2008, I went bankrupt in Nigeria. Tony proceeded to take my shares in UBA to service the interest on my loans and he also took over my shares in Africa Finance Corporation, where I was the largest shareholder.
“Shortly after, Albert Okumagba informed me that an American firm wanted to acquire my shares in Transcorp, which I then agreed to sell. However, this supposed American firm turned out to be Tony Elumelu. The revelation of this prompted me to resign as Chairman of the hotel.
“Years later in 2012 Tony said he wanted to see me so we met in my office where I had previously had a meeting with foreign investors who had not yet departed the premises.
Curious to know, he asked what sort of meeting I had had and I disclosed that I wanted to go into the power business, specifically Ughelli Power Plant. Tony quietly went ahead to bid for Ughelli and he outbid me by offering to buy the plant for $ 300 million.
“And as some would say: the rest is history.
“Fast forward to the present…
“I offered to buy Transcorp Plc for N250 billion, but unfortunately, my offer was rejected. My goal was to maximize the company’s potential as a Nigerian conglomerate with a market cap of at least N2 trillion instead of the current N40 billion, but it seems some shareholders have a different vision.
“As a businessman, I believe in healthy competition and market dynamics. Two captains cannot man a ship, and I respect the majority shareholder’s decision to buy me out. This is the nature of the game.
“But let me be clear: my offer was made with the best intentions for Transcorp Plc and its shareholders. I saw an opportunity to unlock the company’s full potential and create value for everyone involved.
“It’s important for investors to understand that free entry and free exit are crucial to healthy markets. The scramble for shares after my acquisition is a testament to the value that Transcorp Plc can offer, and I hope the company continues to thrive under new leadership.
“My message to Transcorp Plc and its shareholders is this: I remain committed to the growth and success of Nigerian businesses, and I will always be looking for ways to create value for all stakeholders.
“Stakeholders are unfortunately always shortchanged by getting stipends while the owners and managers of the business live a jet-set lifestyle, which is detrimental to the stakeholders. Thank you for the opportunity to engage in this exciting chapter of Transcorp’s history.” #Transcorp Plc: Between Otedola, Elumelu