Opinion

Femi Otedola’s First Bank gambit

By News Desk

Chief Otetola

Of all Femi Otedola’s business interventions, there’s none that scores a greater bulls eye than his recent emergence as the biggest single shareholder of Nigeria’s oldest financial institution, First Bank of Nigeria Plc (FBN).

The mercurial billionaire had been in contention with the bank’s Chairman, Tunde Hassan-Odukale, since October 2021 for the control of the financial institution after news of his shares acquisitions hit the news stand.

When news broke that Otedola had acquired 5.07 per cent shares of the bank and had, therefore, become its majority shareholder, Hassan-Odukale publicly disputed the claim, laying claim to 5.36 per cent shareholding in the holdco.

According to Odukale, he owns “cumulative equity stake” in the bank, drawn from a combination of his direct, indirect and related party shareholding in the group.

Despite the Nigerian Exchange (NGX) and the National Pensions Commission declarations that Odukale’s claim to 1.05 per cent stake held by Leadway Pensure PFA is dubious and limits his shareholding in the bank to only 4.31 per cent, the undeterred Otedola embarked on another massive share buying spree, raking up aditional 2.5 per cent shares to push his total holding in the bank to 7.57 per cent by December 2021.

After about three months of deft maneuvering and intense suspense, Otedola finally succeeded in beating Hassan-Odukale to the chase by becoming First Bank’s undisputed largest shareholder. In all, the billionaire had acquired a total of 2.71 billion shares; direct holdings of 210 million shares, and indirect stake of 2.50 billion shares.

His emergence as the single largest shareholder and the ‘defacto driver’ of the bank was hailed by many stakeholders, including shareholders, staffs and financial experts, who not only predicted that the bank will benefit from his business acumen, but that his coming will put it back on the path to profitability.

The bank didn’t disappoint. As predicted, the financial institution at the end of 2021 Financial Year (FY) bounced back to its leadership position by delivering a much improved performance.

According to its recently released 2021 financial statements, First Bank crossed the threshold of N100 billion profit as it declared a Profit After Tax (PAT) of N130.9billion, a 77.9 per cent improvement over the figure of N73.6 billion recorded in 2020.

The result is the bank’s best performance in more than 10 years. However, hardly had the euphoria died down before the unpredictable Otedola did the unthinkable by divesting about a third of his equity in the bank.

On June 8, FBN Holdings reported the transactions as part of its insider dealing notification to the NGX, a mandatory filing required to be disclosed whenever a significant shareholder is selling shares.

According to FBN Holdings, Otedola had embarked on two back-to-back sales of 234 million shares on Friday, June 3rd and another 600 million shares on Monday, June 6th, 2022, respectively, totalling 834 million shares of FBN Holdings in a deal valued at about N9.28 billion.

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Also, a series of filings posted on the website of the Nigerian Exchange (NGX) indicated that Otedola sold about 834,939,764.00 units representing about 30% of his shareholdings in the bank. With the unexpected sales, the billionaire businessman’s stake in the bank has dropped from about 7.57% to about 5.24%.

The maneuver threw the market into panic and disarray, with many players taking massive hit. For instance, the massive sell-off negatively impacted the valuation of the bank which recently experienced its best price rally in years.
According to BH findings, the FBH share price which rose from N6 to over N12 when news broke that the billionaire investor was mopping up shares of the bank, has dropped to about N6 owing to wild speculations about the billionaire’s next move.

Some of the investors who spoke with BH on the development, lamented that the move caught them by suprise.

A shareholder of the bank who is a retired banker, Adewale Togun, disclosed that many of them were not prepared for the shock caused by Otedola’s massive offloadling of his shares.
“When he (Otedola) came on board, we were happy that his coming will change the fortunes of the bank for good. And we were not dissapointed.

“For instance, we gained about N6 on each share from stock appreciation alone. A colleague of mine who is a retiree recently sold some of his shares to have funds to organise his daughter’s wedding.

“He made over N5million from the shares sale and was able to give his daughter a befitting wedding. He is a lucky guy because he cashed out when the stock price was very high.
“Unfortunately for some shareholders like us who didn’t bailed out fast enough are the ones facing the consequences. I know some people who sold their properties and used the funds to buy shares in First Bank just because Otedola came in.

“Tell me, what is going to be their fate now? We don’t really know what is going on. The question on most peoples lips is why should Otedola, a billionaire, be selling when he should have been buying?”, Pa. Togun asked rhetorically.

However, checks on his business strategy suggest that Otedola may be up to some new business move, perhaps, in another sector, because he is not likely to keep N10 billion under his pillow. This view was confirmed by an investment expert, who did not want to named.

“It is unlikely that he just wanted to take a position in the bank and divest; no, I don’t think so. From the indications, the price could have reached N20 per share before December. Every shrewd investor would have taken the ride a little further for maximum return.

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“So that tells me that he is up to something big in a critical sector because he is very strategic in his business moves.”

Before Otedola’s FBN acquisition, the bank’s market capitalisation was around N253.06 billion, but gained N150.76 billion as the billionaire became a shareholder, with the market valuation rising to N403.82 billion within eight months.

The gains were eroded after the back-to-back sell offs of June 3rd and 6th, 2022 which sparked massive sell offs by panicked shareholders. For instance, the massive sell off dragged FBN Holdings share down by -12%, closing Wedneday, June 8 trading at N9.9kobo per share, against the N11.25kobo it traded on June 6.

The massive sell off also wiped off N48.45 billion from the market capitalisation of First Bank, plunging the valuation to N355.36 billion, from the peak of N403.82 billion on June 3.
BH checks, however, revealed that FBN Holding’s share price has continued to recover from the shock triggered by Otedola’s sudden divestment.

A check on the NGX platform showed that FBNH shares traded N10.55 at the close of business on Friday, June 23, 2022, amid fears that the billionaire might sell more shares and again throw the market into turmoil.

Meanwhile, BH reliably gathered that the Epe-Lagos born billionaire has an ace up his sleeves. According to multiple sources in the capital market who are in the know, Otedola made a little over N3 capital gains from the N7.96 billion worth of shares he sold on the 3rd and 6th June.

Another source close to the billionaire revealed that the shrewd businessman is bidding for one of the power plants recently advertised for sale by the Federal Government, the Geregu Generation Company Limited II in Kogi State and needed all the funds he can lay his hands on.

“As you are aware, rich people rarely dip hands into their pocket to fund an investment. It is either they source it by bringing in equity investors, obtaining bank loans or by disposing assets like shares when prices appreciate, and then buy back when their value drops. In economic terms, it is refered to as OPP (Other People’s Property).

^And I am aware that he is interested in aquiring another power plant that the Federal Government had put in the market for sale”, noted the reliable source.

The Federal Government had on May 6, 2021 advertised in three national dailies that interested investors should submit Expression of Interest (EOI) for five power plants, namely the Benin Generation Company Limited at Ihovba, Edo State; Calabar Generation Company Limited, Cross River State; Geregu Generation Company Limited, Kogi State; Olorunsogo Generation Company Limited, Ogun State; and Omotosho Generation Company Limited, Ondo State.

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The Bureau of Public Enterprises (BPE) later announced that it received 36 EOIs at the close of the advertised period for the preparation of the EOIs.

It was also gathered that Amperion Power Distribution Limited is among the firms pre-qualified for the purchase of one of the power plants.

Otedola is not a novice in the power market. BH checks revealed that after divesting from Forte Oil, his iconic oil firm in 2018, he invested the proceeds in expanding Geregu Power Plant I in which he owned substantial interest.

According to available data, the billionaire businessman had since invested over $1.5billion on the plant, starting from the initial purchase fee of $94 million and another $350 million and $1billion realised from the sale of Forte Oil which was pumped into the 414MW plant.

Despite his selling off about a quarter of his recently acquired shares in First Bank, Otedola, it was learnt, is not thinking of exiting the bank soon, contrary to the fears of the institution’s many stakeholders.

“As things stand, he is still the largest single shareholder of the bank with 5.24% (1.99 billion shares valued at N23.97 billion) of his stake still intact.

“I believe what happened was that he simply capitalised on the appreciation of the bank shares to make quick money which I heard is close to N4billion”, a stock trader who had consulted for Otedola in the past stated.
The source also revealed that the billionaire has started buying the shares he sold at a premium for much much less.

“These guys are sharks and their bags are full of tricks. I won’t be suprised if he again embark on another seling spree with the hope of making a kill.

“I have been in the business long enough to know what such investors are capable of. The only people I pity are fringe investors who only have inconsequential stake in the bank.

“Am aware of several people whose investments in the bank have been wiped out by that deft singular move”, he stated.
Otedola may, however, be in for a shocker as some stock market experts feared he might not be able to recover the shares, particularly if they had fallen into the hands of a fellow competitor like Hassan-Odukale.

“Without doubt, with the speed the dumped shares were picked up, the buyer must surely be another institutional investor or billionaire.
“Except the buyer is standing in for Otedola, which I doubt, because if they are working together, he would have provided the funds for him to snap up the shares which to me makes no business sense.

“What this means is that his current position may be threatened if the shares he had dumped, per chance, had fallen into the wrong hands”, he warned.

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Musa Tanimu Nasidi