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Tonight, I am going to be tweeting about a famous hospital
Tonight, I am going to be tweeting about a famous hospital
The story delves into the world of corporate mind games, maneuvers and one of the deftest company takeovers I've seen in Nigeria
1. It all began in In 1977, when 3 young Nigerian Doctors, who just returned from abroad decided to come together to setup a hospital.
2. One practiced Medicine, the other a surgeon and third a gynecologist.
3. They converted an apartment owned by one of them into their specialist hospital and shared the rent equally.
4. They named the hospital Mercy Specialist Hospital, located in Alhaji Danmole Street, Surulere, Lagos and began operations in 1977
5. They quickly gained popularity among lower and middle class Nigerians and attracted a lot of patients due to their versatility
6. Interestingly, the 3 Drs worked at d teaching hospital in Lag & managed their hospital part time. A model still being used 2day by many
7. But as with anything Nigeria, their luck will soon run out as then Military Ruler General Obasanjo promulgated a decree
8. The decree said as a medical doctor you were not allowed to work in a teaching hospital and also have a private practice at the same time
9. And so the trio had a huge decision to make on whether to face the rough seas of the corporate world or remain government worker
10. After some advice and soul searching, they decide to take their fate in their hands, took a bank loan and went full time
11. And so, in 1982, alexander Eneli, sunday Kuku, and augustine Obiora came together to cofound a hospital named EKO Hospital Ltd.
12. And as you may very well know, the hospital was coined from the first letter of their surnames.
13. The hospital opened its first branch in Ikeja on Mobolaji Bank Anthony way and opened another branch in Surulere some years after.
14. With time, the hospital became one of the most popular hospital in Nigeria and
15. quickly became famous for treating the Upper Middle class and rich Nigerians.
16. By 1991 the hospital became a PLC and will change its name to Eko Corp Plc by 1994, when it listed on the Nigerian Stock Exchange.
17. Things went well for the hospital for over 2 decades until after the millennium
18. when it started experiencing cash flow challenges.
19. Despite marginal growth in revenues, Eko Corp still faced cash flow problems and it was owed hundreds of millions
20. Things got so bad, they started owing salaries and could not pay their founding directors their emoluments and benefits timely
21. At some point between 2012 and 2004 it owed the Joint Chief Medical Directors (JCMDs) about N107 million
22. A breakdown of the amount showed the company owed E - N27m, K N43 million and O N42 million; respectively.
23. Tragedy however struck in December 2005, when one of its cofounders Dr Eneli, died at the hospital after a brief illness.
24. Following his death, the company decided to raise funds which will be used to repay the JCMDs as well as provide working capital.
25. They also got the JCMD's to agree to convert about 75% of what is being owed into equity, while they source cash to pay the balance
26. Around that time the company had reported that it owed the JCMDs & one of its directors (F.G.A Cole) about N118 million
27. The company then decided it was time to go and source equity investment from an investor
28. looking to own part of what was at the time one of Nigeria's most popular hospital.
This is where the second part of this thread starts
This is where the second part of this thread starts
As we enter the second part of this story, remember to retweet the very first tweet of this thread so most people can read too.
29. Sometime in 2007 Eko Corp approached a Dr Geoffrey Ohen of Geoff Ohen Ltd to invest in Eko Corp Plc.
30. Dr Ohen was already a shareholder in the hospital and an oil and gas Magnate.
Not sure where he made his original money from
Not sure where he made his original money from
31. Dr Ohen or is company was said to own just 63 million shares in Eko Corp at the time while the doctors owned about 56 million each
32. Jointly, they still had majority shares and as partners and "brothers" would always make decisions in their collective best interest
33. And so they offered Geoff Ohen Ltd 110m units at N4 each, hoping to raise at least N440 million in cold cash
34. The deal as allegedly agreed by the parties will have Eko Corp pay d JCMDs 25% of d outstanding in cash and convert the bal to equity.
35.The board of directors quickly approved the deal and cash was paid to the JCMDs while they fixed a date for an AGM to ratify the deal and
36. get shareholders to approve an increase in share capital to accommodate the new shares that will be issued for the 75% debt equity swap
37. The AGM date was fixed for sometime in October of 2007 to give everyone time to revel in what was at the time a win win for all
38. Unbeknownst to the JCMD’s Geoff Ohen had a different approach to winning. What was a victory without losers? Eh? Eh?
39. Geoff Ohen Ltd had all through the time “surreptitiously” acquired shares in Eko Corp, previously owned by GTB and Secure Swaps Ltd
40. Interestingly, the GTB&Secure Swaps shares were under litigation but good old Geoff had convinced d Eko Corp directors to drop the suit
41. In the spirit of good sportsmanship. After all, he had just dropped a whopping N440m, so surely it was in everyone's best interest
42. The move to acquire the shares suddenly took Geoff Ohen's ownership in Eko Corp to 53%, usurping d founding directors combined majority
43. And as you would expect in moves likes these. The Barbarians will be waiting at the gate.
And so they did with the next move
And so they did with the next move
44. Now that he owned 53%, Geoff Ohen quickly blocked the debt equity swap conversion they had all earlier agreed upon
45. And as these things always happen, SEC came from nowhere insisting that any such deal will require a special AGM and not the general one
46. Dr Ohen had all the aces in his hands and waited for the good old founders they make their next move
47. The founders, K&O obviously livid at being outwitted by Dr Ohen, accused him of going against a board
resolution
resolution
48. where it was agreed that they swap 75% of the debt to equity, a move that Dr Ohen himself benefited from when he bought 110m units.
49. Mr Ohen, was unfazed and claimed that Ekocorp Plc was not indebted to its founding directors, .
50. as the debt was not disclosed in the prospectus that he based his investment decision on. It didn't end there
51. He also claimed that he was not bothered by the 75% debt equity swap as he knew they will still need an AGM to ratify the board decision
52. and so his plan all along was to play the fool and patiently acquire majority shares before the AGM date, which he successfully did.
53. Mr Ohen also blamed Dr Kuku and Obiora for mismanaging the hospital which resulted in the so-called debts
54. And as such cannot be seen to benefit from that misfortune. He didn't stop there...
55. He also accused them of a concocted strategy to further drain the company financially "under the guise of an alleged debt-equity swap".
56.When confronted about d fact that he betrayed his fellow directors he said that he was "under no obligation to disclose his acquisitions"
57.“Such information was already in the possession of the Registrar & company sec whose duty it is to report to the Board of Directors,” EOQ
58. With his new status as majority shareholder, he also claimed to be privy of new information that he did not have
59.including a letter addressed to the Securities and Exchange Commission, SEC, seeking their permission to their proposed debt-equity swap.
60. Which of course the SEC rejected. He then claimed that there was never any "lawful debt" owed by Eko Corp to the founding directors
61. The JCMDs accused him also of blocking the AGM as that would have paved the way for them to get back their company
61. Dr Ohen retorted that they had not held an AGM because the founders feared that
62. if they did, they might be ousted as directors so they have basically stalled it.
63. This battle has gone one for years now resulting in the inability of the company to release its annual report or hold AGMs
64. With their annual reports, one can see clearly who owns what and when
65. However, last Friday, it finally published its 2014 and 2015 annual reports to avoid the threat of being de-listed in the NSE
66. Surprisingly and despite all the squabbles, Eko Corp still reported a revenues of N1.3 b in 2015 and was still profitable
67. Infact it has reported a revenue of about N1 billion since 2012 and have been profitable since 2011.
The challenge was its cashflows
The challenge was its cashflows
68. The company bled so much cash because most of the revenues was on paper. No cash to back it up
69. And as for who owns the company today. Here is how it was disclosed in its annual reports
70. Firstly on the debt, the company discloses it still owes the directors N776 million in emoluments and retirement expenses
71. The company also disclosed the 75% debt for equity swap as "deposit for shares" and awaiting SEC approval
71. The report also disclosed Geoff Ohen's 110m units was under litigation even though it was captured in full & not as "deposit for shares"
73. Shareholdings as at 2015 was as follows
Geoff Ohen Ltd - 53%
Founders each have 11.3%
Rest belongs to the public
Geoff Ohen Ltd - 53%
Founders each have 11.3%
Rest belongs to the public
74. The morale of this story is clear for everyone to see. Three young men, braved all odds to setup a truly Nigerian Company
75. From a simple Startup all the way to till date the only listed hospital on the Nigerian Stock Exchange.
76. Nevertheless, the murky world of corporate takeovers and restructuring can be ruthless if you don't guard your keep.
77. That will be all for now and I hope you enjoyed this episode of #Nigeriacorporatestories. Rememember to retweet the very first tweet
78. Pls send in comments to @Nairametrics and feedback if there are parts of this story you do not agree with or can add to.We love feedback
79. Hopefully, next month we will bring you another interesting corporate story from Nigeria.
A lot happen here we can all learn from
A lot happen here we can all learn from
80. Thanks again for reading and have a good evening.
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