Forte Oil Plc has entered into share sale and purchase agreements to sell its power and upstream businesses in continuation of complicated divestment programme involving its major shareholder and Chairman, Mr. Femi Otedola.
In a regulatory filing at the Nigerian Stock Exchange (NSE) at the weekend, Forte Oil stated that it has entered into share sale and purchase agreement with Calvados Global Services Limited for the sale of its power distribution company, Amperion Power Distribution Company Limited.
Forte Oil has also entered into share sale and purchase agreement with Gbonka Oil and Gas Limited for the divestment and sale of its shares in Forte Upstream Services Limited.
The two new agreements came as the indigenous energy group confirmed that it had concluded divestment of its shares in AP Oil and Gas Ghana Limited to Cobalt International Services (Ghana) Limited.
Forte Upstream Services Limited, AP Oil and Gas Ghana Limited are wholly-owned subsidiaries of Forte Oil while the indigenous energy group holds majority equity stake of 57 per cent in Amperion Power Distribution Company Limited. Amperion Power Distribution Company Limited holds the majority equity stake in the lucrative Geregu Power Plc.
General Counsel, Forte Oil, Mr. Akinleye Olagbende, stated that the two new share purchase and sale agreements were however subject to the fulfilment of relevant conditions as specified in the respective agreement, including obtaining relevant contractual and regulatory approvals.
In February, this year, shareholders of Forte Oil approved major resolutions authorising the sale of the company’s subsidiaries to Mr Femi Otedola, the majority core investor in the company. Otedola holds 75 per cent majority equity stake in Forte Oil.
At the Extra-Ordinary General Meeting (EGM) in Lagos, shareholders approved a resolution authorising the company to enter into discussions with Otedola or any company representing him in connection with assets to be divested.
In the weekend’s regulatory filing, the company was however silent on the relationship between the bidding companies and Otedola. Global search for identities of both Calvados Global Services Limited and Gbonka Oil and Gas Limited did not provide any links to the companies. A market source said the two companies might be newly incorporated firms or special purpose vehicles formed for the purpose of the acquisitions.
Otedola had also in December 2018 announced that he planned to sell his 75 per cent majority equity stake in Forte Oil to Prudent Energy. The December 2018 announcement came after shareholders had in May 2018 approved a restructuring plan pushed by Otedola-led board of directors aimed at restructuring the group’s operations by divesting from its upstream services and power generating businesses and the sale of its downstream business in Ghana. Shareholders had authorised the board of the company to sell its stakes in Forte Upstream Services Limited, Amperion Power Distribution Limited and AP Oil & Gas Ghana Limited.
In the explanatory statement on the Forte Oil-Otedola divestment deal, the company had indicated that the highly lucrative Geregu Power Plc was the immediate focus of Otedola’s acquisition. However, the resolutions at the EGM broadly covered all assets under divestment.
In an explanatory statement signed by Olagbende, the company explained that Otedola showed interest in acquiring the Geregu Power Plc after a public tender sale organised by the board failed to produce acceptable offer.
According to the statement, upon review of the tender sale process, the management of the company saw unexpectedly low interest in the bidding process while the offers were below expectation and the bidders unable to demonstrate adequate financing capability and capacity.
The statement assured that the sale process to Otedola, who abstained from voting yesterday, would be subjected to rigourous scrutiny by management and independent financial adviser to ensure that the terms are based on normal commercial terms and not prejudicial to the interests of the company and its shareholders.
The company stated that the divestment would provide adequate funding for additional investment in its downstream business.
“The proceeds of this restructuring exercise will enable your company to compete more favourably and achieve its planned expansion objectives within the downstream subsector. This will also reduce our finance cost significantly and increase distributable earnings for the benefit of our shareholders,” the company stated.
Chairman and majority shareholder, Otedola had in December 2018 announced that he had reached preliminary agreement to sell his entire 75 per cent majority equity stake in the company.
Forte Oil confirmed that Otedola was selling his “full 75 per cent direct and indirect shareholding in the company’s downstream business”. The downstream business accounts for more than three-quarters of the Forte Oil Group, although the power generation business has consistently delivered higher margins.
Olagbende stated that Otedola was divesting his majority equity stake to Prudent Energy team, which would be investing through Ignite Investments and Commodities Limited.
According to the company, Otedola’s divestment from the downstream business is pursuant to his decision to explore and maximize business opportunities in refining and petrochemicals. 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.
