Thread by @ugodre

Hello Twitter Fam, welcome to Corporate Stories by @Nairametrics

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On this thread, we will be telling a story of one Nigeria's most popular Oil company.

The 61 year old company is full of history of complex deal making and controversies. So you will have to be patient as this is a long ride

Focus here will be on a recent board room scandal that is threatening the investments of thousands of Nigerians and possibly jobs

We will of course begin with a historical perspective of this company and how it came to be one of Nigeria's most controversial businesses

1. In 1956, just 4 years before Nigeria's independence, a company Esso West Africa Incorporated was formed in Lagos Nigeria.

2.The coy was owned by Enron, one of the largest energy company in the world at the time and would trade under this name for d next 20yrs

3. In 1976, the period often referred to as the oil boom era, The Nigeria Govt acquired Esso’s interest & became sole owners of the company.

4. The govt. soon changed the name of the company “Unipetrol Nigeria Limited”

5. Just 9 years earlier, a baby boy named Jibril Adewale Tinubu (JAT) was born to the household of Alhaji Kafaru O. Tinubu.

6. Alhaji Tinubu was a lawyer, political God Father and retired Police Commissioner in the old Western Region.

7. Just as young JAT was going through the rigours of primary school, a young Italian, Gabriele Volpi arrived Nigeria

8. to begin a new phase of life that will eventually lead to him being one of the most influential and richest Nigerian.

9. Unknown to the two, their destiny would soon cross path in one of the most remarkable way you can ever imagine

10. The young JAT will eventually graduate as a lawyer to the pride of his Father who had hoped that

11. he would one day help run his practice. This of course is the wish of most Parents.

But JAT had other plans

12. He would eventually join the chambers of Sofunde, Osakwe, Ogundipe and Belgore

13. and was soon assigned to learn under a then rising litigator, Babatunde Raji Fashola.

14. In perhaps the first sign of his ruthless ambition, JAT convinced Fashola, his boss, to join him and setup their own law firm.

15. Fashola would eventually agree and so they formed KO Tinubu and Co law firm, intentionally jacking the name of his Father’s law firm.

16. The idea for the young JAT was to ride on an established brand.

His Father was perhaps the first to taste the ruthlessness of JAT.

17. But JAT was not really into law, at least not the way Fashola practiced.

18. He was more interested in oil and gas deals and soon found comfort in a friend, Jite Okoloko.

19. Jite would later introduce JAT to a deal in Unipetrol, to supply diesel from Unipetrol to fishing trawlers in Porthacourt.

20. They had no vessel to execute the trade until another friend, Mofe Boyo showed up with a solution.

21. Mofe, who then worked American oil services company that had shipping vessels, introduced them to a boat named, The Carolina.

22. The ship cost $10k a month, which JAT had to borrow from his dad to fund. This would perhaps be the first of many borrowings

23. They soon hired the ship for $10k a month and started their supply business.

24. In that same year, in 1994, they formed a company which they would call Ocean and Oil Ltd.

25. Business went quite well in the early months until they faced delays in payments from their clients. Soon they started owing

26. The owners of the The Carolina, frustrated about being owed, were also facing financial squabbles and wanted to sell the ship.

27. For the trio, this was a big chance they could not pass on.

28. The trio got a microfinance firm to loan them $100k at 10% interest rate per month, which they used to purchase the boat.

29. In typical JAT style, the deal also relieved them of paying their outstanding liabilities to the ship owners

30. In the 90’s the Federal Government under the leadership of General Babangida had decided to privatize government entities.

31. However, privatisation would not start fully on the democracy was ushered in 1999, with President Obasanjo, sworn in as President

32. This was timely as it coincided with the early exposure of JAT and his friends into the lucrative world of crony capitalism.

33. It so happened that one of it’s entities listed for privatisation in 2000 was Unipetrol

34. JAT and his friends, again decided to put together an audacious bid for 30% of Unipetrol, which the government put up for sale

35. At the time, the CEO of Unipetrol and former Chairman of the NFA, Yusuf Alli, reportedly burst out laughing

36. joking that it was like a tilapia fish trying to swallow up a whole whale!

He will come to taste the corporate ruthlessness of JAT.

37. At the head of the privatisation in the new Democracy was Ahaji Atiku Abubakar, the VP of Nigeria and a business partner of Volpi.

38. The deal was also being midwifed by a firebrand technocrat by the name of Mallam El-Rufai, the DG of the Bureau of Public Enterprise.

39. Atiku had encountered El Rufai at a world bank seminar in the UK and soon convinced him

40. to come and run the country’s privatisation programme under the auspices of the BPE.

41. In the corporate world of deals and deal making, politics and business have a surreptitious love relationship

42. And so, Ocean and Oil Ltd soon acquired 30% of Unipetrol in 2000

43. The gist then was that they secured funding from CEPSA, a Spanish Oil trading firm, who were their technical partners.

44. The deal cost $19 million at the time and was as usual laden with a lot of controversy.

45. How they got the Spanish firm to fund this transaction is as complicated and mysterious as their complex shareholding structure.

46.The labour Union at the time kicked, that the government was selling this firm at a give away price.

47. Some claim the cash left when they bought Unipetrol was more than the 30% equity they paid for, suggesting that the deal was free.

48. The annual report however, showed that was not the case. Most of the cash was bank overdrafts

49. JAT soon became CEO with his two friends on the board as executive directors of Unipetrol.

50. Being on the board, they soon structured a technical services fee of 4% of profit, to be paid by Unipetrol to Ocean and Oil Ltd.

51. Two years later, the trio again led Unipetrol to the acquisition of 60% ownership of Agip Oil.

52. Just like in the Unipetrol deal, they had no cash and had to rely on loans to fund the transaction.

53. They obtained a syndicated loan of N8b, from a consortium of banks led by First Bank Nigeria, to pay for the acquisition of Agip

54. In 2003, Unipetrol Nigeria Plc merged with Agip Nigeria Plc and was rebranded “Oando”.

55. Thus, began a journey of complex deal making, alliances and acquisitions that spanned across continents.

56. For the trio, still in their thirties, they were soon celebrities in the corporate world then dominated by banking whizkids

57. They had plans to dominate the oil industry in their sight and had already courted government officials and banks.

58. Their popularity soared and most Nigerians saw them as role models.

Soon, their fans would be invited to join the train.

59. Their popularity at the time would not go to waste so they immediately launched a combination of a rights issue and public offer in 2004

60. Oando planned to raise N5 billion but the frenzy and hype that followed the whizkids, helped them to raise a whopping N16 billion.

61. The rights issue, over subscribed by N11 billion, was a record at the time. Nigerians had joined a train that would face twist and turns

62. Unknown to a lot of investors, at a rights issue rice of N95, they were paying the trio, 38x the earnings per share of the company.

63. By the time the offer was over, the multiple had risen to 48X.

New shareholders were on board but had no controlling interest

64. The trio still retained control (43%) of Oando via a holding company named Oando and oil Development Partners (OODP).

65. Within 11 years of owning this company, JAT and his friends had changed the shareholding structure of the company a total of 12x

66. Out of the 12, 6 of the changes was via Bonus issues.

67. Oando, under the management of JAT, has changed the shareholding structure every year except 3, since he became the CEO in 2000.

68. The coy would also own several subsidiaries & assets under complex shareholding structures, most of which were registered as tax havens

69. They also had embedded several voting rights and agreements that gave investors in their SPVs no say on the management of Oando

70. Here is an excerpt of what a typical agreement looked like

71. "Ownership of the Class A shares by the company provides it with 60% voting rights but no rights to receive dividends or distributions

72. from the applicable Operating Associate, except on liquidation or winding up..

73. Ownership of the Class B shares entitles the Holdco Associates to 40% voting rights and

100% dividends and distributions, except on liquidation or winding up. " EOQ

It's that complex

74. And so by the end of 2013, the share price of Oando had crashed from that Public offer price of N95 to as low as N19

75. due to the effect of multiple bonus issues, right issues, scheme of arrangement, poor results and bad decisions.

76. In 2010, the audacious trio will again take a decision that would perhaps alter the course of the company’s history forever.

We have come to the end of Part 1 of this series.

Hope it's been an interesting ride thus far.

Part 2 will be live tomorrow.

Thanks for reading through and do kindly rt the very first thread if you find this thread useful.

Thanks & do have a great weekend.

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