Download Oando Group to offer investors 49% of marketing arm in strategy shift

Oando Group to offer investors 49% of marketing arm in strategy shift
•Oando Marketing to be listed on Stock Exchange as stand-alone
A major shift in strategy is on the cards at Oando Group with a plan by
the indigenous oil company to hive off 49 percent stakes in its
marketing arm, Oando Marketing, to investors, BusinessDay learnt
from capital market sources close to this arrangement at the weekend.
In the 2009 financial result, Oando Marketing recorded sales in excess
of N163 billion and posted profit of N5.8 billion.
According to the plan, in order to consolidate its leadership in all
sectors of the oil and gas industry, Oando plc will restructure its
business strategy with the divestment of about 49% of its stake in
Oando Marketing.
Oando spokesperson last night declined comments advising “until all
relevant approvals are in place.” This strategy was designed to “create
investment opportunity for shareholders in the upstream and
downstream [sectors of the business],” said one fund manager. The
move will provide investment options to shareholders interested in
guaranteed short to medium term returns in the marketing company.
The strategy will also offer long term investment option through the
company’s upstream business, Oando Plc, affording investors the
opportunity to maximize risks through diversification. Indeed, a
document seen by BusinessDay suggests a company upbeat about the
value the new strategy will bring to investors.
“A new window of opportunity is available to shareholders by the
alternative investment options, all from a Group with proven track
record of impressive results in spite of challenging economic
environment,” internal documents shows.
The eventual listing of Oando Marketing on the stock exchange will
significantly alter the current classification of companies as the NSE
will have to create a different category for Oando plc, the oil
exploration and production business. That category could be called
Energy, as the case on the Johannesbourg Stock Exchange, while
Oando Marketing will remain under the petroleum marketing sector.
Oando Group currently owns 100 percent of the marketing business,
but BusinessDay learnt that the company will release as much as 49
percent to the investing public in Nigeria, a move that will eventually
lead to the listing of Oando Marketing on the Nigerian Stock Exchange.
The move is likely to be interpreted by the market as a clear effort by
the company to create an understandable distinction between its
upstream and downstream businesses, as it continues to grow its oil
exploration portfolio and with a marketing operation that has been on
for 54 years. “What this means is that the creation of Oando Marketing
plc from the group will favour shareholders who seek yearly dividends
from a company that on its own will no longer be tied to the very long
term nature of oil exploration and production business where investors
often have to wait for that big pay day even while enjoying capital
appreciation in the value of their shares,” said a fund manager at a
leading investment firm.
Oando began its early life as Unipetrol Nigeria plc, an oil marketing
company that was bought by Ocean and Oil Holdings led by Wale
Tinubu, current group chief executive officer of the company, in 2000.
In 2002, Unipetrol merged with Agip Nigeria plc after the former
bought into Agip and the name was changed the following year to
Oando.
Investors are likely to see a lot of value in the new strategy when the
planned sale goes ahead. BusinessDay has learnt that the marketing
business generates a cash flow of N500 million daily in sales and has
been delivering profit yearly to the group under the leadership of
Omamofe Boyo. But sources familiar with the kind of plan that Oando
is trying to pull off say there are much wider reasons why this is the
way to go for the company. Specifically, they say it offers some
significant benefits to both the group and the marketing plc that will
emerge.
“For the marketing business, the divestment strategy will provide a
credible investment option for shareholders
Phillip Isakpa
BUSINESSDAY Monday, 23 August 2010