Oando Plc has entered into an agreement with HV Investments II B.V. (HVI) to acquire its downstream businesses for about US$276 million — subject to regulatory approvals and customary purchase price adjustments, including working capital.
Oando’s Head, Corporate Communications, Ainoije ‘Alex’ Irune, said HV Investments is a joint venture owned by a fund advised by Helios Investment Partners and the Vitol Group.
For local content reasons, the voting rights structure is that HVI and Oando will each have 49 per cent while a Nigerian Helios Affiliate will two per cent voting rights.
Oando downstream businesses consist of Oando Marketing Plc (OMP), a petroleum product retailing and distribution company with over 400 retail outlets and strategically located terminals in Nigeria, Ghana and Togo. OMP distributes premium motor spirit, automotive gas oil, dual-purpose kerosene, aviation turbine kerosene, low pour fuel oil, lubricating oils, greases, bitumen and liquefied petroleum gas. Key OMP subsidiaries that are part of the acquisition include Oando Ghana Limited, Oando Togo SA and Clean Cooking Fuel Investments Limited.
Other downstream businesses include Oando Supply & Trading Limited, an indigenous trader of petroleum products in the sub-Saharan region, supplying and trading crude oil and refined petroleum products, Oando Trading Limited (Bermuda), an entity involved in the trading of crude oil and refined petroleum products in international markets, 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 licence supplying white products.
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. At closing, HVI will own 60 per cent of the special purpose vehicle. Oando will hold a 40 per cent stake.
Commenting on the deal, Group Chief Executive Officer, Oando Plc, Wale Tinubu, stated: “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.”
During a mid-year teleconference with investors and analysts in July 2014 to announce the conclusion of Oando’s game-changing $1.56 million acquisition of ConocoPhillips Nigerian assets, Mr. Tinubu had hinted at the probability of a shift in Oando’s strategy to focus on the implementation of a three-pronged approach to reduce debt, diversify into the higher margin upstream, and an increase growth margin value for shareholders through an augmented production portfolio and cash flow.
Analysts indicate that Oando Plc had decided against an outright sale of its downstream subsidiary, but entered into an agreement with HV Investments due to the strategic partnership, accelerated expansion and increased investment on offer. “This partial equity agreement presents a unique opportunity for a significant growth in the size and scale of our operations, while substantially strengthening our 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,” Tinubu said.
The Oando group has primarily focused on the growth of its Nigerian-based assets portfolio in the last year, including viable opportunities that optimise its operations, delivery and upstream footprint, such as the ramp up of its production from 5,000 barrels of oil equivalent per day (boe/d) pre-acquisition of ConocoPhillips Nigeria to its present output of 53,100 boe/d.
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