Recent reports have highlighted the growing unrest amongst minority shareholders of Oando, who are reportedly not satisfied with the current proposals surrounding the acquisition of their shares by the majority of shareholders. Displeased shareholders are challenging the exit price offered, claiming that it does not reflect a fair value.
The Back Story
Oando Plc disclosed that it has received an offer from its core shareholder, Ocean and Oil Development Partners Limited (OODP), to acquire the shares of all minority shareholders in the company. Following the acquisition, the company will be delisted from NGX and JSE and re-registered as a private company. Under the Scheme, each Scheme Shareholder shall be entitled to receive the sum of N7.07 in cash or its equivalent in South African Rand (ZAR) for every ordinary share held by qualified Scheme Shareholders at the Effective Date of the Scheme.
What does it mean?
In this situation, there are two possible outcomes to consider. The first is the possibility of a revised offer, which would be higher than the previous N7.07 that was offered. The second possibility is the cancellation of the proposed scheme altogether.
It is worth noting that Oando has not made dividend payments to shareholders in recent years.
Valued by its assets, the company’s book value stands at about N111.00. The company was loss-making in previous years but recorded a profit in its recently released 2021 audit.
The market awaits 2022 audited reports to be released later this year.
Historically, when a majority shareholder wants to buy out the minority shareholders, they buy the shares of the minority shareholders at a predetermined price, or at a price determined by an appropriate valuation technique specified in an agreement (usually at a premium), in order to compel the minority shareholders to sell.
Our view
We believe that this is a good opportunity for investors with trading appetite to take position in Oando as we foresee volatility in the shares in the coming days.