Oil
Why Oando divested 60% downstream equity for $461m
By Kunle KALEJAYE
LAGOS-THERE are indications that Oando Plc, an indigenous energy group operating in Nigeria may have agreed to divest 60 percent equity stake of its downstream business to HV Investments for US$461 million due to liquidity issues which may have arisen as a fallout of the ConocoPhillips acquisition.
Oil Tank farm
HV Investments is a joint venture owned by Helios Investment Partners and The Vitol Group, and the acquisition.
Inside sources who preferred not to be mentioned opined that the company is majorly concerned with its new upstream acquisition and how to boost its daily crude oil production while maintaining a world class operational crew.
“it is highly capital intensive to operate in the upstream. it is public knowledge what the company suffered under the last administration especially with regards to the Conocophillips deal and that was not a very good experience for the company.” he said.
According to statement signed by Oando’s Head of Corporate Communications, Mr. Ainoije Alex Irune explained that at the end of deal, HVI will own 60 percent of the special purpose vehicle, while Oando will hold a 40percent stake.
For local content reasons the voting rights structure is as follows – HVI and Oando will each have 49 percent voting rights and a Nigerian Helios Affiliate Two percent voting rights.
However, Oando’s CEO, Mr. Wale Tinubu stated that the deal is to help positioned the company’s downstream for a new era of investment growth, profitability adding that the divestment also enables the company to increase its focus on upstream and midstream businesses.
The total consideration of US$461.3 million will be funded by a US$276.8 million cash contribution from HVI and US$184.5 million in preference shares issued to Oando PLC, subject to customary purchase price adjustments, including working capital and long-term debt.
“This transaction is an exciting development in Downstream West Africa.
“By working with Vitol, a global energy and commodities company, and the largest independent trader of energy products, and Helios, a premier Africa-focused private investment firm, we have repositioned Oando Downstream for a new era of investment growth, profitability, and this venture holds unprecedented opportunities for the business. Importantly, this divestment also enables us to increase our focus on our upstream and midstream businesses.
“Even as proceeds of the sale will be applied almost entirely to reducing Oando’s leverage, we underscore the portfolio rationalisation achieved alongside the balance sheet optimisation,” Wale Tinubu said.
Tinubu added that the partial equity agreement presents a unique opportunity for a significant growth in the size and scale of the company’s operations, while substantially strengthening their position in the downstream sector.
“Though we employ a multifaceted approach across the energy value chain, we have immense pride in our origins as a predominantly downstream company, and we had no reason to sell, as our brand deeply resonates with many in Africa and globally,” said Mr. Tinubu.
Oando downstream operations include: Oando Marketing PLC, a petroleum product retailing and distribution company with over 400 retail outlets and strategically located terminals in Nigeria, Ghana and Togo; Oando Supply
Trading Limited, an indigenous physical trader of petroleum products in the sub-Saharan region, supplying and trading crude oil and refined petroleum products; Oando Trading Limited, an entity involved in the trading of crude oil and refined petroleum products in international markets.
Others are Apapa SPM Limited, the marina jetty and subsea pipeline system capable of berthing large vessels that will increase the delivery capacity and offloading efficiency of petroleum products into major petroleum marketers’ storage facilities at Apapa, Lagos; and Ebony Oil & Gas Limited, the Ghanaian supply and trading entity with a provisional bulk distribution company license supplying white products.
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