LAGOS, OCTOBER 24, 2016 – About 12 foreign and indigenous firms are in hot race for Total’s multi-billion dollar downstream assets, as the French oil multinational mulls total exit from Nigeria’s petroleum product imports, storage and retails sub-sector.Total, the only remain ing multinational player in Nigeria’s downstream, New Telegraph learnt, decided to sell off its downstream assets due to the shrinking profit margins at the sub-sector. ExxonMobil, another multinational oil firm, completed the sale of its assets to NIPCO Plc., an indigenous firm, last Wednesday.
“The divestment of Total’s downstream assets too is on-going. It is a confidential deal, which meetings have been held outside the shores of Nigeria several times with contenders mostly indigenous firms,” a source close to the dealsaid. Total declined to comment on the deal because of its confidential nature, but a source at the company confirmed the move to New Telegraph yesterday.
“There is an on-going negotiation with companies for divestment of our downstream assets, about a dozen of them have submitted proposal and we are making progress on the deal,” he said. Asked for the reason behind the divestment, which is coming after ExxonMobil’s sale of its 60 per cent stake in Mobil Oil Nigeria (MON) to NIPCO Plc., the source said:
“The downstream sector is bearish, with profit margin shrinking everyday. The consumption of petroleum product by Nigerians has dipped drastically while the issue of foreign exchange scarcity made the Nigerian National Petroleum Corporation (NNPC) to be major player as we speak in terms of importation.
“To make the matter worse, the removal of subsidy announced in May was a major turning point in the annals of oil majors participation in the downstream.” More facts emerged at the weekend over NIPCO’s takeover of ExxonMobil assets.
The deal, a source at ExxonMobil told this newspaper, dates back to about 24 months when NIPCO showed interest in taking 10 per cent of ExxonMobil equity in Mobil Oil Nigeria Plc. and probably had one director from NIPCO representing its interest in MON board.
“However, a few months ago, two things happened: One, ExxonMobil began to give signs of full divestment. Second, NIPCO was trying to increase its stake in the downstream sector by looking for big deals in the sector. The first point of call was ExxonMobil, which they had open discussion with for partial takeover on its downstream business in Nigeria,” the source said.
ExxonMobil too still had NIPCO in mind, having had several meetings initially on the 10 per cent bid, the source added. “One way or the other, the deal seems to be taking shape with other parties meeting extensively outside Nigerian shores with powerful people in Exxon- Mobil and NIPCO team led by one of its directors and the main person financing the deal – Ramesh Kansagra – and NIPCO itself.
“Ramesh is a multibillionaire, very quiet, unassuming personality and he is the chairman of Pure Bond Ltd, which owns 60 per cent equity in NIPCO Plc. “He has varied interest in other conglomerates in Nigeria such as salt and ceramics, among others.
He majorly brokered the deal on behalf of NIPCO with NIPCO’s Managing Director, Executive Director (Finance, Corporate Services) and the company secretary, Paul Obi, providing the legal details to make the deal very smooth.
“Virtually, meetings on the deal were held outside Nigerian shores mainly to protect the confidentiality of the deal, even though lots of corporate governance and due diligence was done on NIPCO, including searching for details about our imports under the subsidy regime.
“NIPCO may not have all the financial muzzle to acquire Mobil, but the integrity and financial capability of Ramesh played a very significant role in the deal,” the source said. On the re-branding plan, he added that there will “definitely be a name change, but definitely not immediate.”
The first causality of the deal at NIPCO, he said, is that the much-taunted establishment of a lubricant plant by the firm may not materialise again. “Massive expansion of Mobil lubricant plant in Nigeria will be made to take care of the thousands of interest that NIPCO lube plant would have taken care of,” he added.