The shares of Mobil Oil Nigeria Plc are up by N103 in a week, as the oil marketer rallied by 47 percent since it provided more clarity on a deal in which Nipco Investments Limited is purchasing a 60 percent stake in it.
Investors have effectively gained N29 billion since Monday November 28 when Mobil closed trading at N219.41 per share with a market capitalisation of N79.11 billion.
“The sharp rise in Mobil’s share price is because investors believe that Nipco will be a more aggressive operator in the downstream sector than Mobil. This would lead to more profitable operations. That is why investors are taking position on the company’s stocks” said Johnson Chukwu, managing director and CEO, Cowry Asset Management.
Mobil Oil said last week, that its majority shareholder, ExxonMobil Oil Corporation, has agreed, subject to regulatory approvals, to sell its 216,357,157 shares, representing 60 percent of Mobil Oil Nigeria to Nipco Investments Limited, for $301 million, subject to price adjustments for dividends and other factors.
With this purchase, Nipco Plc will directly and indirectly own 65.5 percent of the issued share capital of the downstream marketer.
Nipco is acquiring the 60 per cent stake at a very high premium, translating to about N424 per share.
The stock closed at N323 per share yesterday, giving it a market capitalisation of N116 billion which is still lower than the circa $500 m valuation for 100 percent of Mobil or (N152.5 billion at N305/$).
Venkataraman Venkatapathy ,managing director of Nipco, had said the company considered the acquisition an important synergy.
“It is part of our strategic move to support Nipco’s continuous growth and expansion of its Nigerian retail footprint. We are confident of adding tremendous value to Mobil Oil Nigeria and likewise, Mobil Oil will add a huge value to Nipco.
“In furtherance of this value addition, Nipco will continue to maintain the Mobil brand on its retail outlets, as well as continue to blend and sell the Mobil brand of lubricants under Branding Licence(s) from ExxonMobil,” he said.
According to Venkatapathy, Mobil Oil will continue to run as a separate, distinct and independent company, from Nipco Plc, each with its own CEO who will report to its board of directors.
“In essence, Mobil Oil will continue as usual, and therefore the change should be smooth and seamless,” he added.
Analysts say that while such an acquisition premium typically captures goodwill and other brand value, ExxonMobil has gotten a really good deal, especially in the current market environment.
For the first nine months through September 2016, Mobil Nigeria’s net income increased by 57.69 percent to N5.74 billion from N3.65 billion the previous year.
Sales rose by 58.56 percent to N71.86 billion amid a cocktail of risks, includes a severe dollar scarcity and currency devaluation.
The company’s profitability was inflated by its income from non-operational sources, most importantly rents from its real estate property, according to Kareem Adebayo, energy analyst at Ecobank Plc.
“With a new owner that is fully focused on the downstream sector, we believe Nipco will better reposition the company to an industry champion and leverage on existing structures to expand the company and regain lost market share,” Adebayo said.
There has been a spate of divestments in the downstream oil and gas sector in the last five years, as challenging times require small players to consolidate operations to reach the economies of scale required for survival.
PATRICK ATUANYA
