Irked by the proposed acquisition of shares held by minority shareholders of Ardova Plc by Ignite Investment and Commodities Limited, stakeholders have urged the Securities and Exchange Commission (SEC) to prioritize the protection of investors to prevent further loss of investment.
The shareholders, who kicked the share formula, said that with the plan of acquisition of the shares at an offer price of ₦17.38 kobo, as opposed to N66 per share where the company acquired 74.02 percent stake in Forte Oil Plc, now Ardova Plc, in July 2019 is a disincentive.
He stressed that the Nigerian Exchange Limited (NGX) and the SEC must ensure compliance with section 131 of the Investment and Securities Act and rule 445 of the commission, which requires Ignite Investment and Commodities Limited to follow the Mandatory Tender Offer rules to ensure fairness as stipulated in the Companies and Allied Matters Act (CAMA).
In a mandatory tender offer, the bidder must bid the highest price paid for the securities in the previous six months. If the offer includes payment by transfer or allotment of securities, the securities must be fairly valued.
Head of Equity, Planet Capital Limited, Dr. Paul Uzum, insisted that the fair value for the minority investor’s purchase of shares in Ardova Plc should be at least N66, not the N17.38 suggested by the company. He also stated that the market is setting a dangerous precedent on the takeover of public companies in Nigeria, which will undermine the interest of retail investors in the market with the planned deal.
Uzum, in a letter to the SEC to suggest the same value for the transaction, also warned that if the regulator fails to take appropriate measures to protect minority shareholders, there may be no market for everyone tomorrow.
“It is important to note that maintaining the integrity of our stock market lies with the Exchange and the SEC, and you are expected to do everything in your power to protect all classes of investors. This action by Ardova Plc appears to undermine the integrity of the market.
“Therefore, I count on your commitment not only to protect the interests of all stakeholders and the integrity of the capital market, but also to ensure global best practices.”
According to him, in the letter, Ignite Investments and Commodities Limited has approached the directors of Ardova Plc to acquire the shares held by other shareholders in the company at an offer price of ₦17.38 per share, and then divest the shares. company from the exchange.
He stated that the offer price of N17.38 represents a premium of 22.44 percent and 24.38 percent to the 30-day volume and 60-day average volume of the share price of N14.19 and N13.97, respectively, on November 30. 2022 (being the last trading day before the offer).
Uzum recalled that Ignite Investment and Commodities Ltd, in July 2019, acquired a 74.02 percent stake, in Forte Oil Plc from Mr. Femi Otedola at a price of N 66 per share and later changed the name of the company to Ardova Plc.
According to him, prior to this acquisition, the former majority shareholder, Femi Otedola had disposed of the company’s major assets, including the company’s choice asset – Geregu Power Plant which he bought as the majority shareholder at a price of N11.7 billion.
He argued that with the stripping of the selected assets of Forte Oil / Ardova, like Geregu Power Plant in the net book value, the form and structure of the company they invested in has changed; other so that, in such a situation, just buy out all minority shareholdings at the same price N66 can save minority investors from losses in investment.
He said: “In 2022, Femi Otedola/Zenon filed a final claim against Ignite Investment/Prudent Energy for not being able to pay the $6 million balance due on June 18. This is proof that the sale and purchase agreement between Femi Otedola/Zenon and Ignite Investment/ Prudent Energy includes some contingent considerations, which are paid over time, after the date of the transaction; this raises the transaction price above the N66 benchmark deal.
“We also know that the majority shareholder has removed the shares of minority investors over the past four years using a proxy company, with the aim of using this additional shareholding to vote in accordance with the planned delisting.”
He lamented that in 2022, when all the downstream Oil & Gas companies including MRS, Conoil and Total announced bumper profits, due to better petrol prices, Ardova Plc reported huge losses, saying that the company’s profits were harvested above. majority shareholders to influence the price for delisting eventually and buy off the minority at a ridiculous price.
“Today, Geregu Power Plant, which was a subsidiary of Forte Oil/Ardova four years ago, is a listed entity on the Nigerian Exchange Group with a market capitalization of N520 bn. It was divested at N11.7 billion from Forte Oil/Ardova Plc. The entire market capitalization Ardova Plc is now a small amount of the amount of N 22 billion.
Therefore, he stressed that the fair value of the purchase of minority Investors investment from Ardova Plc, should be at least N66, not the N17.38 proposed by the company when it asked the SEC to step up to its responsibility to protect it. investors in the market.
“In the last public offer conducted by AP/Forte Oil/Ardova Plc in 2008, the company raised N110 billion through a hybrid offer of 199, 070, 021 ordinary shares at N250 per share, and a rights issue of 262, 929, 279 units at N230 per share. A lot of retail investors are investing in this company at this price. Are these investors exiting the company at N17.38 so they can be dumped,” he asked.
The President of the New Dimension Shareholders Association of Nigeria, Patrick Ajudua said that the shareholders are at the receiving end when the transaction does not follow market rules because the delisting regulatory action does not guarantee compensation to the investors, unlike the voluntary delisting that happens when the company decides. remove all stocks from the exchange.
He stressed that the government should focus more on creating an enabling environment and appropriate policies to reduce the effects of macroeconomic headwinds on listed companies.
According to him, there is also a need for the regulator to participate in this company to ascertain the reasons for delisting and the inimical factors for its operational existence.
“Shareholders are not happy with the delisting plan of Ardova Plc because the investment aims to generate returns and it will not last long. We believe that the regulators will do everything they can to prevent the increasing delisting, especially in the oil and gas sector.
“Regulators should develop an incentive scheme for companies in the capital market that will be attractive and should be able to increase financial growth. In case of delisting, efforts should be made to protect minority shareholders and ensure that they are not shortchanged,” he said.
The President of Issuers and Investors Alternative Dispute Resolution Initiative (IIADRI), Moses Igbrude lamented that every time a company delists from the exchange, minority shareholders are always at a loss.
“It is unfortunate that directors would take over a company and mismanage it to buy out minority shareholders cheaply. This is unacceptable and should not be encouraged by the SEC.