Irked by the proposed acquisition of shares held by the minority shareholders of Ardova Plc by Ignite Investment and Commodities Limited, stakeholders have urged the Securities and Exchange Commission (SEC) to give priority to investor protection to prevent further loss of investment.

The shareholders, who kicked against the sharing formula, argued that with the planned acquisition of the shares at an offer price of ₦17.38 kobo, as against N66 per share at which the company acquired 74.02 per cent stake in Forte Oil Plc, now Ardova Plc, in July 2019 is a disincentive.

They insisted that the Nigerian Exchange Limited (NGX) and the SEC must ensure compliance with section 131 of the Investment and Securities Act and rule 445 of the commission, which require Ignite Investment and Commodities Limited to follow Mandatory Tender Offer rules to guarantee fairness as stipulated in the Companies and Allied Matters Act (CAMA).

In a mandatory tender offer, the offeror shall be compelled to offer the highest price paid by him for such securities during the preceding six months. If the offer involves payment by transfer or allotment of securities, such securities must be valued on an equitable basis.

Head of Equity, Planet Capital Limited, Dr. Paul Uzum, insisted that the fair value for the buyout of the minority investors’ stock in Ardova Plc should be at least N66, not the N17.38 suggested by the company. He also stated that the market is setting a dangerous precedent on the takeover of public listed companies in Nigeria, which will erode interest of retail investors in the market with the planned deal.

Uzum, in a letter to SEC to suggest a fair value for the transaction, also warned that if the regulators fail to take appropriate measures to protect minority shareholders, there may be no market for everyone tomorrow.

“It is important to note that upholding the integrity of our stock market rests on the Exchange and the SEC, and it is expected that you do all within your power to protect all classes of investors. This action by Ardova Plc appears to undermine the integrity of the market.

“Therefore, I count on your unalloyed commitment not only to protecting the interests of all stakeholders and the integrity of the capital market, but also to ensure the pursuit of global best practices.”

According to him, in the notification letter, Ignite Investments and Commodities Limited had approached the directors of the company of Ardova Plc intending to acquire the shares held by other shareholders of the company at an offer price of ₦17.38 per share, and subsequently delist the company from the exchange.

He pointed out that the offer price of N17.38 represents a premium of 22.44 per cent and 24.38 per cent to the 30-day and 60-day volume weighted average share price of N14.19 and N13.97, respectively, on 30 November 2022 (being the last trading day before the offer).

Uzum recalled that Ignite Investment and Commodities Ltd had, in July 2019 acquired 74.02 per cent stake, in Forte Oil Plc from Mr. Femi Otedola at a price of N 66 per share and subsequently changed the name of the company to Ardova Plc.

According to him, before this acquisition, the former majority shareholder, Femi Otedola already stripped off key assets of the company, including the firm’s choice assets – Geregu Power Plant which he bought as majority shareholder at a net value price of N11.7 billion.

He argued that with the stripping of choice assets of the Forte Oil/Ardova, like the Geregu Power Plant at the net book value, the form and structure of the company they invested in had changed; more so, in such a circumstance, only buying out all minority shareholdings at the fair price of N66 could save minority investors from losses in their investment.

He said: “In 2022, Femi Otedola/Zenon filed a winding-up claim on Ignite Investment/Prudent Energy over its inability to pay the balance of $6 million due on June 18. This is a testament that the sales and purchase agreement between Femi Otedola/Zenon and Ignite Investment/Prudent Energy included some contingent considerations, which were payable over a while, post the transaction date; this raises the transaction price above the N66 deal benchmark.

“We are also privy to the fact that the majority shareholder has been mopping up the shares of minority investors over the last four years using proxy companies, intending to use this additional shareholding to cast votes in its favor in its planned delisting.”

He lamented that in 2022, when all downstream Oil & Gas companies inclusive of MRS, Conoil and Total are declaring bumper profits, given better pricing of petrol, Ardova Plc declared a heavy loss, noting that profits of the company are being harvested topline by the majority shareholder to affect valuation for their eventual delisting and buying off minorities at a ridiculous price.

“Today, Geregu Power Plant, which was a subsidiary of Forte Oil/Ardova four years ago, is a listed entity at the Nigerian Exchange Group with a market capitalisation of N520 bn. It was stripped off at N11.7 billion from Forte Oil/Ardova Plc. The market capitalization of the entire Ardova Plc today is a paltry sum of the sum of N 22 billion.”

Therefore, he insisted that the fair value for the buyout of the investment of minority Investors of Ardova Plc, should be at least a minimum of N66, not the N17.38 proposed by the company while urging the SEC to rise to the responsibility of protecting investors in the market.

“In the last public offer done by the AP/Forte Oil/Ardova Plc in 2008, the firm raise N110 billion in a hybrid offer of 199, 070, 021 ordinary shares at N250 per share, and a rights issue of 262, 929, 279 units at N230 per share. Many retail investors invested in this company at this price. Should these investors exit the company at a price of N17.38 for them to delist,” he queried.

President of New Dimension Shareholders Association of Nigeria, Patrick Ajudua lamented that shareholders are at the receiving end whenever such transactions do not follow market rules because regulatory action of delisting did not guarantee any compensation for investors, unlike voluntary delisting that occurs when a company decides to remove all its shares from the exchange.

He stressed the need for the government to focus more on creating an enabling environment and favourable policy needed to cushion the effect of macroeconomic headwinds on a listed firm.

According to him, there is also a need for the regulators to engage these companies to ascertain reasons for delisting and factors inimical to their operational existence.

“Shareholders are not happy with the planned delisting of Ardova Plc because the investment aims to earn returns and that has been short-lived. We believe that the regulators would do everything within their power to curb this rising delisting, particularly in the oil and gas sector.

“Regulators must develop an incentive scheme for companies in the capital market that will serve as an attraction and must be able to add to their financial growth. In the event of delisting, effort must be made to protect minority shareholders and ensure that they are not short-changed,” he said.

President of Issuers and Investors Alternative Dispute Resolution Initiative (IIADRI), Moses Igbrude lamented that any time a company delists from the exchange, minority shareholders are always at a loss.

“It is very unfortunate that directors will take over companies and mismanage them to buy out the minority shareholders cheaply. This is unacceptable and should not be encouraged by the SEC.