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Rights Issue : Oando positioning for local,global competitiveness

By Peter Egwuatu

FOLLOWING its ongo ng over N20 billion Rights Issue, Oando Plc is gearing up for both local and global competition which will take the centre stage when the petroleum sector is fully deregulated in Nigeria.

The Federal Government has repeatedly affirmed that it would deregulate the petroleum sector at the appropriate time.
Stock market operators who spoke with Vanguard said, “ Oando has the potential and the credibility to become a major player in the global energy industry in the 21st century. With its plan to inject N200 billion fresh funds through various funds raising options from both local and international markets the company is really gearing up for growth .Specifically, this is the first step taken by the company in strengthening its capital base to support continued business growth.”

In 2004, Oando made history as the first non-bank corporate to successfully raise N15billion from Nigerian capital market. Interestingly, the company had set out to raise N5 billion but the offering was over-subscribed by 459 per cent or  N10 billion realised additionally.  Indeed, the Securities Exchange Commission (SEC) had approved the offer by way of rights of 20,384,957ordinary shares of 50 kobo each at N95 per share to existing shareholders and the offer for subscription of 31,419,785 ordinary shares of 50 kobo each at N97.50 per share to new shareholders. The Rights Issue was fully subscribed at N1,936,507,915 billion whilst the Public Offer was oversubscribed by N14,061,138,000 billion.

Oando had gone back to the market to raise funds for working capital and to execute the following strategic projects; Refinancing Gaslink Investment, Building of small terminals in Calabar to make sure all ports are covered and construction of additional storage tanks, Repair of roads and street lighting as well as the modernisation of environmental, Health and safety equipment in the Apapa terminal.

Also, the company carried out an expansion of its storage facility in Port Harcourt constructed pipeline and installed fire hydrant system. The equipment at the Kaduna Lube plant was expanded by installing automatic capping and labelling machine.
Operators observed that the company’s pledge to use the proceeds to consolidate its position in the downstream marketing industry and further diversify its revenue streams by leveraging on existing assets has been validated.

In the past five years, Oando has been able to deploy funds realised from the equity sales in profitable businesses. Originally focused on downstream petroleum marketing, the company has become an integrated energy solutions provider with operations spread across West Africa.

Meanwhile, while briefing capital market correspondents during the completion Board meeting for the Rights Issue, Group Executive Managing Director, Mr.Wale Tinubu said “ The Rights Issue is meant for existing shareholders of the company and is to be distributed in the proportion of one for three; meaning one new ordinary share will be distributed to a shareholder who has three ordinary shares of 50 kobo each at a  price of N70 per share.

Speaking to newsmen after the completion board meeting, Group Managing Director, Oando Plc, Mr. Wale Tinubu said,” The Rights Issue is very important for the company as it will help refinance the acquisition of upstream asset,  provide additional capital to fund the operation of the upstream business  and also short and medium term investments in its gas and power business segment.”

According to him, “The net Rights Issue proceeds is estimated at N20.437 billion after deducting the total cost of the Issue estimated at N681, 312 million, (representing 3.23 per cent of the Issue), will be applied as follows : Upstream Assets Refinancing N14.919 billion; Operational Capital Development and Upstream Business Development N3.883 billion; Technology N3.658 billion; People N225 million and Working capital N1.634 billion.”

While responding to question on the timing of the offering, he said, “ There is no better time than now. The offer is a good one coming from a viable company with very sound fundamentals. So our shareholders will surely take their rights because it is a juicy offer. We see the offering to be very successful. We have track record and the company is doing well. A good offer can sell any time. So we are confident that the Issue will be fully subscribed.”
Onado Plc has an authorised share capital of one billion comprising 2 billion ordinary shares of 50 kobo each with issued and fully paid up capital of N452,542,314 comprising 905,084,628 ordinary shares of 50 kobo each.

The company is presently offering 301,694 876 ordinary shares of 50 kobo each to its existing shareholders at N70 per share. The ongoing Rights Issue opened on Monday 25, January 2010 and is scheduled to close on Friday, 19 February 2010.

The company share is currently being traded at N93.99 per share at the stock market. This is the price at which the Nigerian Stock Exchange (NSE) placed technical suspension on the share when the company notified  it of its intention to float a Rights Issue. The implication is that the price of the share cannot move beyond N93.99 per share.

The technical suspension placed on the price of the share  is a normal practice adopted by the Exchange when any quoted company is coming out with any offer. The technical suspension is also meant to give investors equal opportunity to partake in the Issue and prevent  insider knowledge abuse.
Meanwhile, major parties to the Issue include: Vetiva Capital Market Limited as lead Issuing House and FCMB Capital Markets Limited and Stanbic IBTC Bank Plc as joint Issuing Houses.

First Registrars Nigeria Limited as registrar to the Issue; PriceWater HouseCoopers as Chartered Accountants; Vetiva Securities Limited, CSL Stockbrokers Limited, Stanbic IBTC Stockbrokers Limited as joint stockbrokers to the offer.

Commenting on planned N200 billion funds raising, Tinubu said, we have just commenced a Rights Issue of over N20 billion. We  will be proceeding to do a much larger international equity Issue which would occur at the beginning of the second quarter. Then there is going to be two debt issues. One is a local five year debt issue which we are working on right now and the mandate has been signed, it’s in the final stages.”

Tinubu  further emphasized: “The final thing would be the bond issue. We are in the process of fund raising the debt restructuring 5 year term for N60 billion. Then we would do an international equity and debt raising of N75 billion which would come in the second  quarter. The bulk of the money is going into our gas and upstream division for the upstream, we have our crude oil. You are aware; we have diversified heavily towards increasing our production in the crude oil sector.”

Oando has said that plans on its proposed refinery are in progress and it expects to bring the refinery on stream on schedule.
The refinery, which is expected to refine 240,000 barrels of crude per day, according to the company, would be completed in five years and the construction divided into two phases.

The phase one, which includes land acquisition, site works and front end engineering design (FEED), among others, has begun. Land acquisition and FEED have been completed and the construction of tank farm is expected to begin within the next 12 months.

Tinubu had said that  the company would also build a large import terminal on the same location. The tanks, which according to him were intended to be used for import, would also end up becoming export tanks when the refinery is completed .
itself and we should expect it to be operational in the next five years.”


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