Nigeria: Long Trail of Exiting Companies Threatens Nigerian Exchange's Drive to Grow Listings

MTN Nigeria's public shares sale, held in December 2021, remains the only IPO to be recorded by the NGX in the past five years.

Between last year and now, the Nigerian Exchange (NGX) has seen a surge of voluntary exits from companies listed on the bourse as more firms, for various motivations, rejig their business models to seek greater opportunities outside public ownership.

From banking to energy and consumer goods sectors, at least seven firms have left the exchange on their own within the period or are in the middle of doing so in moves that could weaken the NGX's newfound drive to attract fresh listings and boost market capitalisation.

The exchange only admitted two new companies (VFD Group and Mecure Industries) last year and has added Transcorp Power to its list this year.

In December 2022, the Securities and Exchange Commission (SEC) approved listing rules for NGX's new technology board as part of the strategies to attract startup listings and end a drought of initial public offering (IPO) that has plagued the market for years.

None of the companies the new listing segment targets have quoted their shares ever since.

MTN Nigeria's public shares sale, held in December 2021, remains the only IPO to be recorded by the NGX in the past five years. It is so because the exuberance that once drove equity trading in the days before the 2008 global financial crisis continues to elude the market, making IPOs unviable for corporates.

In a report by President Bola Tinubu's policy advisory team last May, the committee revealed a lofty plan by the government to grow market capitalisation to 25 per cent of Nigeria's GDP between 12 to 18 months.

The market value of the six companies that have voluntarily withdrawn from the exchange since last year comes to N263.2 billion, while that of the other two, which are still in the process, is N158.2 billion as of 29 April.

The bid by the British majority owners of PZ Cussons Nigeria to acquire the interest of minority shareholders flopped in March when the SEC refrained from approving the deal for failure to meet some regulatory requirements.

Ardova (formerly Forte Oil), Union Bank, Capital Hotels and Courteville have left the stock exchange, just like GlaxoSmithKline Consumer (GSK), which last year shut down its manufacturing operations in Nigeria and switched to a distribution model.

"I guess it varies from business to business," said Muyiwa Oni, regional head of equity research, West Africa at Standard Bank, of companies' reasons for dumping the exchange.

"For some, you want access to capital through the stock market. And so they feel maybe that motivation or opportunity is not there any longer. So that's why that adjustment is happening."

In situations where companies are no longer getting the optimum value they desire from the stock exchange, they are likely to quit, Mr Oni further said.

Public listing sometimes comes with bottlenecks and stock exchange rules, such as time limits for filing financial reports and other statutory documents, which could attract weighty fines if flouted. It can be challenging for companies to observe.

Such limitations are virtually non-existent in private ownership, which is free of the scrutiny and oversight of market regulators, which is more reason for some companies to operate privately.

Yet, for some, the logic boils down to strategy, as in the cases where the owners of a private company decide to take it public to gain more access to capital to scale the business from potential shareholders and investors.

Once such firms have grown to the size the majority owners are targeting, the investors offer to buy out other shareholders' stakes, often at a premium, and return the company to private ownership, enabling the original owners to take it back.

"It is not uncommon for companies to leverage stock exchanges to raise capital, expand their business, and later decide to go private or delist," Andrew Latham, managing director of SuperMoney, a platform that helps consumers evaluate financial services, told PREMIUM TIMES via Quoted.

"Being publicly listed offers access to a broad capital pool but also comes with regulatory scrutiny, pressure to meet quarterly expectations, and other challenges. Once these companies have capitalised on the benefits, some see an advantage in returning to private status," he added.

"It's a strategic play where the perceived benefits of public listing--capital infusion, enhanced public image, and increased valuation--might eventually be outweighed by the desire for operational flexibility, less regulatory scrutiny, and the potential for long-term strategic planning without the immediate pressures from shareholders," Mr Latham went further to say.

The CEO noted that the strategy might benefit some, but it might not be suitable for all business models or industries.

Ardova

Oilman Abdulwasiu Sowami acquired the majority stake in Forte Oil, renamed Ardova, in June 2019 from billionaire tycoon Femi Otedola using his special-purpose vehicle Prudent Energy. The deal, worth N64.9 billion, conferred ownership of 74 per cent of the company's shares on its new owner.

At the point of acquisition, total assets were in the neighbourhood N61.7 billion. In February 2023, Mr Sowami offered to buy other shareholders' holdings in Ardova, ultimately purchasing them at N17.88 per unit for a total value of about N17.4 billion.

The full acquisition led the company to delist its shares from the NGX in July 2023, enabling him to own it privately.

Between June 2019, when Mr Sowami bought the controlling stake, and July 2023, when he acquired the whole company, the total assets had appreciated by roughly 145.7 per cent to N151.6 billion.

Ardova's exit from the NGX reduced the exchange's market capitalisation by N21.8 billion.

Union Bank

Titan Trust Bank inked a deal in 2021 to purchase the controlling stake in Lagos-listed Union Bank from Atlas Mara, a British Virgin Islands-based financial services holding company. Following the acquisition, Titan Trust Bank increased its interest in the lender to 94.05 per cent, according to the bank's 2022 audited financial report.

Tropical General Investments Limited, the parent company of Titan Trust Bank, is founded, owned and chaired by Cornelius G Vink, a Dutch national and a Nigerian by naturalisation.

Union Bank's total assets as of 30 June 2022, when Titan Trust acquired the majority stake, was N2.5 trillion.

Union Bank completed the removal of its shares from the daily official list of the NGX last November after 52 years of trading, costing the exchange N194 billion.

Capital Hotels

22 Hospitality Limited, a wholly-owned subsidiary of energy company NIPCO Plc, in September 2022 acquired 66.1 per cent of the issued shares of Capital Hotels. Capital Hotels counts Abuja Continental Hotel (former Sheraton) among its subsidiaries.

The majority owner would initiate a tender offer to buy out other shareholders' interests and consummate the transaction in 2023.

The deal would give Capital Hotels "the opportunity to strategise for better performance, minimise costs, and stay competitive within its industry," the company stated this as its rationale for quitting public listing, according to a filing at the NGX.

Total assets as of September 2022, when 22 Hospitality procured the controlling stake, was N28.9 billion, which climbed to N30.3 billion about the time it full acquired the company.

Capital Hotels ditched the NGX in November, causing the bourse's market value to decline by N9.6 billion.

Courteville Business Solutions

Courteville completed its exit from the NGX last November after a few months in the works. The firm quit as the directors' board felt the market value of its shares was not commensurate with its key performance metrics, even though the management thought the fundamentals were strong and attractive enough.

"We are considering pulling out from the Nigerian stock exchange temporarily. Our shares have not been adequately valuable over the past ten years. We make huge returns on investment, but the market price of our stocks is less than its value," CEO Adebola Akindele said at its annual general meeting in 2023.

"We are considering pulling out from the Nigerian stock exchange temporarily. Our shares have not been adequately valuable over the past ten years. We make huge returns on investment, but the market price of our stocks is less than its value," he added.

Nonetheless, its most recent financials do not show notable improvement in performance. Courteville's unaudited accounts for the nine months to last September pointed at a clear setback in profitability, with it recording a loss after tax of N25.3 million in contrast to a net profit of N113.3 million a year ago.

Revenue also dropped by 24 per cent to N1 billion, while total assets dipped to N4.4 billion from N4.6 billion.

The delisting of Courteville's shares caused the market capitalisation of the NGX to drop by N2.1 billion.

GSK

Drug maker GSK announced last August it was winding down its Nigerian operations. The company disclosed "its strategic intent to cease commercialisation of its prescription medicines and vaccines in Nigeria through the GSK local operating companies and transition to a third-party direct distribution model for its pharmaceutical products."

The company received the SEC's nod in November 2023 to proceed with the move and offered other shareholders, apart from GSK UK (the principal shareholder), a cash distribution of N17.42 per share. This February, GSK quit the NGX, causing the combined value of the market to shrink by N20.3 billion.

Coronation Insurance

Coronation Insurance, backed by Access Bank's Chairman Aigboje Aig-Imoukhuede, disclosed last July that its biggest shareholder Coronation Capital (Mauritius) Limited and some other shareholders had tabled an offer to take the underwriter private.

Mr Aig-Imoukhuede helped found Coronation Capital (Mauritius) Limited. Coronation Capital (Mauritius) offered other shareholders N0.65 per share, 30 per cent greater than the company's share price of NN0.50 as of 12 August 2021, the last traded price before the offer date.

The NGX lost N15.4 billion of its market capitalisation to Coronation Insurance's exit in January.

Oando

Oando, which has dual listings in Johannesburg and Lagos, announced in March 2023 that it received an offer from its core shareholder - Ocean and Oil Development Partners Limited (OODP) - seeking to purchase the holdings of all the minority shareholders in the energy company.

Wale Tinubu, Oando's CEO, and Omamofe Boyo, his deputy, own OODP. No mention has been made of why the core shareholders want to take the company private.

OODP became Oando's majority shareholder in 2003. Between 2013 and 2021, total assets had climbed 78.9 per cent to N966.1 billion.

Oando's delisting from NGX could knock N111 billion off the exchange's market capitalisation, based on its total share value as of 29 April.

MRS OIL

Sayyu Dantata, the half-brother of Africa, founded the energy firm's wealthiest man, Aliko Dangote, who is close to leaving the boursee, having announced an extraordinary general meeting to hold in May, where it plans to get shareholders' approval.

MRS Oil's withdrawal is set to reduce NGX's market value by N46.3 billion, the worth of its total issued shares as of 29 April.

The company hasn't' made a disclosure on why it is delisting from the exchange.

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