Source: Oando Plc
Nigeria’s Oil and Gas Giant, Oando Plc announced on Monday that it has secured a $210 million recapitalization deal for its downstream operations by HV Investments II B.V., (“HVI”). HVI is a joint venture owned by Helios Investment Partners (“Helios”), a premier Africa-focused private investment firm and the Vitol Group (“Vitol”), the world’s largest independent trader of energy commodities (together, the “Consortium”).
The deal will see the formation of a new company called OVH Energy (“OVH”). OVH will not own interest in Oando Marketing Limited, Oando Supply & Trading Limited, Apapa SPM Limited, and Oando Trippmart Limited. Oando PLC will retain 49% shareholding in the newly formed corporate vehicle, with the Consortium owning 49%, and the residual 2% owned by a local entity.
Breaking down the deal
- Oando in a prior press release has confirmed that HVI was injecting about USD210million in OVH. Thus the 49% equity values OVH at a whopping $428.9 million or N128.7 billion. Oando ‘s 49% is thus valued at about N63 billion.
- Oando as a group currently has a market capitalization of about N88 billion. Investors are probably looking at this and will likely place a high enterprise value multiple on Oando.
- If Oando’s 49% ownership of a subsidiary is worth N63 billion and its total market is N88 billion, then one can assume that Oando is undervalued based on its enterprise equity value.
- Oando’s share price rose by 10% at the close of trading on Monday. It is likely that the share price will rise further on the back of this valuation.
- According to the company, OVH’s assets will comprise over 350 service stations in Nigeria with supporting infrastructure, including 84,000 tonnes of storage and a newly built inbound logistics jetty
- It will also include its complementary businesses, chiefly LPG filling and distribution, lubricants and an interest in a supply and bulk distribution company in Ghana.
- The new business will be the second largest downstream fuels company in Nigeria, with a market share of 12 per cent. Only Total is currently bigger
- Oando’s downstream assets in 2015 generated a combined revenue of about N253 billion only. However, it reported a combine loss of about N9.1 billion.
- The combined assets of the downstream sector is also about N194 billion while its liabilities is over N204 billion.
- We will believe liquidity and ability to deliver required returns will be a challenge for this company. However, we acknowledge these are giant strides.
The post above and its ensuing comments, if any, is purely the opinion of the writer(s). It therefore should never be considered as an investment advise of any sort. If required, readers should please consult a competent professional financial adviser for any investment decision.