Long trail of exiting companies threatens Nigerian Exchange’s drive to grow listings

Between past twelvemonth and now, the Nigerian Exchange (NGX) has seen a surge of voluntary exits from companies listed connected the bourse arsenic much firms, for assorted motivations, rejig their concern models to question greater opportunities extracurricular nationalist ownership.

From banking to vigor and user goods sectors, astatine slightest 7 firms person near the speech connected their ain wrong the play oregon are successful the mediate of doing truthful successful moves that could weaken the NGX’s newfound thrust to pull caller listings and boost marketplace capitalisation.

The speech lone admitted 2 caller companies (VFD Group and Mecure Industries) past twelvemonth and has added Transcorp Power to its database this year.

In December 2022, the Securities and Exchange Commission (SEC) approved listing rules for NGX’s caller exertion committee arsenic portion of the strategies to pull startup listings and extremity a drought of initial nationalist offering (IPO) that has plagued the marketplace for years.

None of the companies the caller listing conception targets person quoted their shares ever since.

MTN Nigeria’s nationalist shares sale, held successful December 2021, remains the lone IPO to beryllium recorded by the NGX successful the past 5 years. It is truthful due to the fact that the exuberance that erstwhile drove equity trading successful the days earlier the 2008 planetary fiscal situation continues to elude the market, making IPOs unviable for corporates.

In a study by President Bola Tinubu’s argumentation advisory squad past May, the committee revealed a lofty program by the authorities to turn marketplace capitalisation to 25 per cent of Nigeria’s GDP betwixt 12 to 18 months.

The marketplace worth of the six companies that person voluntarily withdrawn from the speech since past twelvemonth comes to N263.2 billion, portion that of the different two, which are inactive successful the process, is N158.2 cardinal arsenic of 29 April.

The bid by the British bulk owners of PZ Cussons Nigeria to get the involvement of number shareholders flopped successful March erstwhile the SEC refrained from approving the woody for nonaccomplishment to conscionable immoderate regulatory requirements.

Ardova (formerly Forte Oil), Union Bank, Capital Hotels and Courteville person near the banal exchange, conscionable similar GlaxoSmithKline Consumer (GSK), which past twelvemonth unopen down its manufacturing operations successful Nigeria and switched to a organisation model.

“I conjecture it varies from concern to business,” said Muyiwa Oni, determination caput of equity research, West Africa astatine Standard Bank, of companies’ reasons for dumping the exchange.

“For some, you privation entree to superior done the banal market. And truthful they consciousness possibly that information oregon accidental is not determination immoderate longer. So that’s wherefore that accommodation is happening.”

In situations wherever companies are nary longer getting the optimum worth they tendency from the banal exchange, they are apt to quit, Mr Oni further said.

Public listing sometimes comes with bottlenecks and banal speech rules, specified arsenic clip limits for filing fiscal reports and different statutory documents, which could pull weighty fines if flouted. It tin beryllium challenging for companies to observe.

Such limitations are virtually non-existent successful backstage ownership, which is escaped of the scrutiny and oversight of marketplace regulators, which is much crushed for immoderate companies to run privately.

Yet, for some, the logic boils down to strategy, arsenic successful the cases wherever the owners of a backstage institution determine to instrumentality it nationalist to summation much entree to superior to standard the concern from imaginable shareholders and investors.

Once specified firms person grown to the size the bulk owners are targeting, the investors connection to bargain retired different shareholders’ stakes, often astatine a premium, and instrumentality the institution to backstage ownership, enabling the archetypal owners to instrumentality it back.

“It is not uncommon for companies to leverage banal exchanges to rise capital, grow their business, and aboriginal determine to spell backstage oregon delist,” Andrew Latham, managing manager of SuperMoney, a level that helps consumers measure fiscal services, told PREMIUM TIMES via Quoted.

“Being publically listed offers entree to a wide superior excavation but besides comes with regulatory scrutiny, unit to conscionable quarterly expectations, and different challenges. Once these companies person capitalised connected the benefits, immoderate spot an vantage successful returning to backstage status,” helium added.

“It’s a strategical play wherever the perceived benefits of nationalist listing—capital infusion, enhanced nationalist image, and accrued valuation—might yet beryllium outweighed by the tendency for operational flexibility, little regulatory scrutiny, and the imaginable for semipermanent strategical readying without the contiguous pressures from shareholders,” Mr Latham went further to say.

The CEO noted that the strategy mightiness payment some, but it mightiness not beryllium suitable for each concern models oregon industries.

Ardova

Oilman Abdulwasiu Sowami acquired the bulk involvement successful Forte Oil, renamed Ardova, successful June 2019 from billionaire tycoon Femi Otedola utilizing his special-purpose conveyance Prudent Energy. The deal, worthy N64.9 billion, conferred ownership of 74 per cent of the company’s shares connected its caller owner.

At the constituent of acquisition, full assets were successful the neighbourhood N61.7 billion. In February 2023, Mr Sowami offered to bargain different shareholders’ holdings successful Ardova, yet purchasing them astatine N17.88 per portion for a full worth of astir N17.4 billion.

The afloat acquisition led the institution to delist its shares from the NGX successful July 2023, enabling him to ain it privately.

Between June 2019, erstwhile Mr Sowami bought the controlling stake, and July 2023, erstwhile helium acquired the full company, the full assets had appreciated by astir 145.7 per cent to N151.6 billion.

Ardova’s exit from the NGX reduced the exchange’s marketplace capitalisation by N21.8 billion.

Union Bank

Titan Trust Bank inked a woody successful 2021 to acquisition the controlling involvement successful Lagos-listed Union Bank from Atlas Mara, a British Virgin Islands-based fiscal services holding company. Following the acquisition, Titan Trust Bank accrued its involvement successful the lender to 94.05 per cent, according to the bank’s 2022 audited fiscal report.

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

Union Bank’s full assets arsenic of 30 June 2022, erstwhile Titan Trust acquired the bulk stake, was N2.5 trillion.

Union Bank completed the removal of its shares from the regular authoritative database of the NGX past November aft 52 years of trading, costing the speech N194 billion.

Capital Hotels

22 Hospitality Limited, a wholly-owned subsidiary of vigor institution NIPCO Plc, successful 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 bulk proprietor would initiate a tender connection to bargain retired different shareholders’ interests and consummate the transaction successful 2023.

The woody would springiness Capital Hotels “the accidental to strategise for amended performance, minimise costs, and enactment competitory wrong its industry,” the institution stated this arsenic its rationale for quitting nationalist listing, according to a filing astatine the NGX.

Total assets arsenic of September 2022, erstwhile 22 Hospitality procured the controlling stake, was N28.9 billion, which climbed to N30.3 cardinal astir the clip it afloat acquired the company.

Capital Hotels ditched the NGX successful November, causing the bourse’s marketplace worth to diminution by N9.6 billion.

Courteville Business Solutions

Courteville completed its exit from the NGX past November aft a fewer months successful the works. The steadfast discontinue arsenic the directors’ committee felt the marketplace worth of its shares was not commensurate with its cardinal show metrics, adjacent though the absorption thought the fundamentals were beardown and charismatic enough.

“We are considering pulling retired from the Nigerian banal speech temporarily. Our shares person not been adequately invaluable implicit the past 10 years. We marque immense returns connected investment, but the marketplace terms of our stocks is little than its value,” CEO Adebola Akindele said astatine its yearly wide gathering successful 2023.

“We are considering pulling retired from the Nigerian banal speech temporarily. Our shares person not been adequately invaluable implicit the past 10 years. We marque immense returns connected investment, but the marketplace terms of our stocks is little than its value,” helium added.

Nonetheless, its astir caller financials bash not amusement notable betterment successful performance. Courteville’s unaudited accounts for the 9 months to past September pointed astatine a wide setback successful profitability, with it signaling a nonaccomplishment aft taxation of N25.3 cardinal successful opposition to a nett net of N113.3 cardinal a twelvemonth ago.

Revenue besides dropped by 24 per cent to N1 billion, portion full assets dipped to N4.4 cardinal from N4.6 billion.

The delisting of Courteville’s shares caused the marketplace capitalisation of the NGX to driblet by N2.1 billion.

GSK

Drug shaper GSK announced past August it was winding down its Nigerian operations. The institution disclosed “its strategical intent to cease commercialisation of its medicine medicines and vaccines successful Nigeria done the GSK section operating companies and modulation to a third-party nonstop organisation exemplary for its pharmaceutical products.”

The institution received the SEC’s motion successful November 2023 to proceed with the determination and offered different shareholders, isolated from GSK UK (the main shareholder), a currency organisation of N17.42 per share. This February, GSK discontinue the NGX, causing the combined worth of the marketplace to shrink by N20.3 billion.

Coronation Insurance

Coronation Insurance, backed by Access Bank’s Chairman Aigboje Aig-Imoukhuede, disclosed past July that its biggest shareholder Coronation Capital (Mauritius) Limited and immoderate different shareholders had tabled an connection to instrumentality the underwriter private.

Mr Aig-Imoukhuede helped recovered Coronation Capital (Mauritius) Limited. Coronation Capital (Mauritius) offered different shareholders N0.65 per share, 30 per cent greater than the company’s stock terms of NN0.50 arsenic of 12 August 2021, the past traded terms earlier the connection date.

The NGX mislaid N15.4 cardinal of its marketplace capitalisation to Coronation Insurance’s exit successful January.

Oando

Oando, which has dual listings successful Johannesburg and Lagos, announced successful March 2023 that it received an connection from its halfway shareholder – Ocean and Oil Development Partners Limited (OODP) – seeking to acquisition the holdings of each the number shareholders successful the vigor company.

Wale Tinubu, Oando’s CEO, and Omamofe Boyo, his deputy, ain OODP. No notation has been made of wherefore the halfway shareholders privation to instrumentality the institution private.

OODP became Oando’s bulk shareholder successful 2003. Between 2013 and 2021, full assets had climbed 78.9 per cent to N966.1 billion.

Oando’s delisting from NGX could sound N111 cardinal disconnected the exchange’s marketplace capitalisation, based connected its full stock worth arsenic of 29 April.

MRS OIL

Sayyu Dantata, the half-brother of Africa, founded the vigor firm’s wealthiest man, Aliko Dangote, who is adjacent to leaving the boursee, having announced an bonzer wide gathering to clasp successful May, wherever it plans to get shareholders’ approval.

MRS Oil’s withdrawal is acceptable to trim NGX’s marketplace worth by N46.3 billion, the worthy of its full issued shares arsenic of 29 April.

The institution hasn’t’ made a disclosure connected wherefore it is delisting from the exchange.