So what’s happening at Oando (2)?

I wrote the original “So what’s happening at Oando?” in October 2015 at the peak of public conversations over the company’s 2014 accounts in an effort to illuminate the economic and business context and understand the underlying issues-the company’s bullish growth ambitions leading to a series of significant acquisitions, in particular of AGIP and Conoco Phillips operations; the collapse of oil prices undermining some of the strategic logic behind the business’ assumptions; Nigeria’s currency devaluation and consequent FX translation issues; and the continued delay by Nigeria’s government of the full deregulation of the downstream petroleum sector all of which resulted in some significant but necessary write-downs of its assets at the time.

The company has been in the news recently over petitions reportedly sent to the Securities and Exchange Commission (SEC) which have been leaked to the media by some parties. I became aware of the story through an online financial publication which alleged that the company’s AGM had been postponed by SEC and an interim management or board was imminent! I was initially quite incredulous at the news, but the company has subsequently clarified that its annual shareholders’ meeting has not been postponed and re-published notice of the AGM slated for September 11, 2017 in Uyo, Akwa Ibom State in the newspapers.

I have also read a statement by the company disclosing that the petitions against it were filed by two persons-Ansbury Inc. a shareholder in another entity domiciled in a foreign jurisdiction which owns shares in a Nigerian investment company invested in Oando; and Alhaji Dahiru Mangal, the well-connected trader and importer, who it appears from the circumstances may be interested in Oando Plc’s corporate control! Alhaji Mangal appears to be claiming ownership of up to 17.9% of the company’s shares even though the company is aware of only a 4% stake. The possibility may be that Mangal has surreptitiously bought additional shares through the use of proxies without notifying the company and market regulators once a 5% threshold was crossed? That would of course raise legal, governance and regulatory issues which might usefully be included in SEC’s investigation? In any case, it appears Ansbury and Mangal acting severally and jointly may have instigated the attempt by SEC to request the company to postpone its AGM while the two petitions are being investigated.

It is obvious that someone within SEC or proximate to it and/or someone with a knowledge of the petitions by Ansbury and Mangal deliberately leaked the petitions to the media and thereafter also leaked SEC’s request that Oando postpone its AGM. I am quite disappointed at such unethical and improper practices given the damage it does to the credibility of the Nigerian capital market and financial market regulation and more importantly the negative impact on shareholders when such information is prematurely leaked causing panic amongst investors. As a result of the first leak in July about the SEC investigation, N25billion of the company’s valuation was lost over a period of six days; and the second leak of SEC’s request for postponement of the AGM would similarly have negative consequences for investors.

The issues here appear simple to me and in the absence of malicious or ulterior motives should not have degenerated into a real or manufactured crisis-at worst there appears to be a dispute amongst these two investors in Oando Plc (who appear to have objectives in relation to the company which may involve corporate control) and the management or majority shareholders of the company. Oando Plc in its statement believes the petitions by these shareholders are of no merit, but that is why we have a market regulator and a system of legal and judicial arbitration including the courts to resolve such disputes. It is clearly improper to release information around the petitions in a manner prejudicial to the interest of the company and its shareholders such as to adversely affect the valuation of the company and diminish the wealth of investors. The proper thing would have been for SEC to carefully and confidentially carry out its investigation until conclusion rather than pressure the company to postpone its AGM creating an impression either of bias or prejudging the facts in dispute. It would be unfortunate if the impression is inadvertently created that SEC’s investigation is tailored towards a desired end!

Oando’s management claims in its statement of August 28, 2017 that it has availed SEC of all the information required to assist its investigation and will continue to cooperate in the enquiry. I doubt the wisdom, propriety and indeed any valid legal or regulatory basis or authority in the circumstances for SEC to request postponement of the AGM especially as none of the items on the agenda of the meeting would appear to include any matters that would be prejudicial to any ownership stakes which Ansbury and Alhaji Mangal might have or seek to exercise in the company. The proper course of action is to avoid the obvious inconvenience to Oando’s over 274,000 shareholders entailed by postponing a validly convened AGM. The company is a public company listed on both the Nigerian and Johannesburg Stock Exchanges and we should not act like this is a banana republic or a financial market in which powerful individuals can exert prejudicial influence on market regulators or quoted companies.

Oando Plc is one of Nigeria’s entrepreneurial success stories. I regularly teach global case studies about its strategic transitions and as a banker decades ago I witnessed the impressive efforts of its young managers to build a very successful oil trading company, and then stage the very transformational acquisition of the old Unipetrol Nigeria. I have done occasional strategy consultations and facilitations with the company and entities within the group and I think this is a reasonably well-managed entity. We should not undermine Nigerian entrepreneurship by negative and unjustified actions just to satisfy the private agendas of individuals.

Opeyemi Agbaje