Serial investor and billionaire, Femi Otedola has withdrawn his stake in Transcorp Plc, Nairametrics can confirm.
Otedola purchased a 6% stake in Transcorp in a series of carefully orchestrated purchases that went largely unnoticed until the announcement of the acquisition. Nairametrics first announced the acquisition.
Reliable sources with knowledge of the deal informed Nairametrics that the billionaire investor had reached an agreement with Elumelu to leave the business.
This decision effectively avoids a possible blackmail situation for Transcorp that could have turned murky. The two sides began negotiations on a possible withdrawal in the early hours of Thursday after declaring their willingness to work together in an apparent brotherhood.
The negotiations that led to the agreement were said to be quick but cordial, as both sides felt the breakup was in their mutual interest. Elemelu and Otedola have publicly agreed to work together for the benefit of Transcorp.
The sources also said that the attention attracted by the stake squabble had distracted the company, leading to the decision to part ways. It is known that the two sides will continue to seek other forms of cooperation for mutual interests in the field of electricity. Sources familiar with the deal between the two billionaires said Elumelu bought Otedola at a premium that is believed to be four to six times the average price per share. Nairametrics could not immediately independently verify the terms of the transaction.
However, confirmed sources in the Elumelu camp who spoke to Nairametrics denied paying the premium outright, saying the deal was done at prevailing market rates on April 27, 2022.
However, a trading announcement is imminent on the Nigerian Exchange.
Mr. Otedola announced in early April that he had purchased a 5.05% stake in Transcorp, making him the company’s second-largest shareholder. The immediate purchase triggered a rally in the stock price, which doubled in less than two weeks.
In response to Mr. Otedola’s acquisition, Elemelu consolidated its shares, increasing its ownership to about 25%, according to an announcement on April 26, 2023.
Sustainability for Otedola
Nairametrics first reported on April 12, 2023, that billionaire investor Femi Otedola bought a 5.52% stake in Transcorp, making him the company’s second-largest shareholder.
The billionaire bought back more than 2 billion shares of the corporation surreptitiously, finally claiming ownership after months of wiping out the shares. He then increased his stake in the company to 6.3%, sparking a title war. Armed with financial strength, the Elumelu faction has moved to tighten its grip on the company by buying more shares even as they openly welcome Otedola into their fray. On Thursday, April 27, Transcorp notified Nigerian Exchange Limited (NGX) and the investment public of a new share repurchase by HH Capital Limited.
HH Capital Limited purchased 9,697,189,984 shares, bringing their total shares in Transcorp to 9,91,173,177 units, accounting for 25.58% of the Company’s total shares. This hastened the decision between the two sides to prepare to withdraw for Mr. Otedola, who we believe is close to finding a seat on the board.
Camp Elemelu sees this as a win-win situation, as the decision to buy Otedola avoids a possible blackmail situation. Greenmail refers to the strategy of buying enough shares in a company to create the threat of a hostile takeover, thereby forcing the target company to buy back its shares at a higher price.
In the context of mergers and acquisitions, green letters serve as a defense mechanism against takeover bids. The company is targeted to buy back its shares at a significantly higher price to prevent a takeover, providing substantial profits to the individual or organization behind the blackmail strategy.
The details of the transaction show that both parties have agreed to exit Otedola for a higher-than-average cost to buy shares over the past few months. That puts an abrupt end to one of the company’s most intriguing moves in 2023. Transcorp’s share price fell 9.9% in the early hours of Friday. The stock is fully stocked with more than 100 million shares offered in limited quantity.