Last week, the Nigerian Stock Exchange Published press release confirming that Exxon Mobil has agreed a deal that will see it sell all its shares in Mobil Nigeria Plc to NIPCO Plc. Exxon Mobil currently owns about 60% of Mobil Nigeria Plc.
The press release did not provide details such on how much the deal is possibly worth, however our research team has come up with a some details about both companies as well as what we currently know about the deal. This page will be updated as new information become available.
What we know
Mobil Oil Nigeria
- ExxonMobil Oil Corporation owns about 60% of Mobil Oil Nigeria, while other investors(mostly Nigerians) own about 40% of the company
- NIPCO is going to acquire 60% of Mobil Oil Nigeria meaning that ExxonMobil is effectively divesting from the downstream side of the oil and gas sector.
- Mobil Plc has in the last couple of years seen margins drop considerably in the downstream business.
- For example in 2014, the downstream business was about 46% (N2.9 billion) of the N6.3 billion profit after tax the company posted that year. Income from Real Estate of about N3.4 billion that year was about 54% of profits.
- In 2015, profit after tax dipped 24% to N4.8 billion with real estate representing 42% of profits at N2 billion while profits from downstream was about N2.8 billion. Profit from the downstream segment saw little growth and is likely to remain depressed with the removal of fuel subsidy and drastic drop in petrol consumption in Nigeria
- Mobil Oil Nigeria Plc has a strong real estate businesses and owns the Mobil HQ building on the VI extension end of Ozumba Mbadiwe.
- The company’s real estate businesses was valued at about N47 billion as at 2015, according to its 2015 financial statements.
- Mobil’s real estate business therefore earns about 4.2% in cap rate (rent/value).
- Mobil will be exiting the downstream sector in Nigeria after over 100years of operations
- NIPCO Plc used to be IPMAN Petroleum Marketing Company Limited (IPMCL)
- The company was however acquired by an Indian Consortium and is now wholly controlled by them
- The CEO of the company is Venkataraman Venkatapathy
- The company reported a turnover of N114.7 billion in 2015 and net profit of about N1.4 billion.
- This compares to Mobil’s 2015 revenue of N64.2 billion and profits of N4.8 billion.
- NIPCO has been paying dividends every year since 2004. From a dividend of about 10kobo in 2004, dividend growth reached an all time high of 375kobo in 2014 (2015: 300kobo).
- NIPCO adopted a policy in 2007 that saw it increase dividend every year by 25 kobo. Dividend per share grew from 200 kobo in 2007 to 375 kobo in 2014.
- NIPCO has about 187.6 million units and an earnings per share of about N7.5.
- Using Mobil’s price to earnings ratio of 10x, NIPCO’s could be valued at about N14billion compared to Mobil’s total valuation (as at date the deal was announced) 0f N68.5 billion.
- Based on this valuation, this deal could cost NIPCO a minimum of about N41.1 billion. However, there are indications that it could be much more.
- According to NIPCO, the funding for the project will be via a hybrid of debt and equity.
- No amount has been placed yet, so we do not know officially how much NIPCO will be paying ExxonMobil.
- According to the CEO, Venkataraman Venkatapathy both parties are ‘under a strict confidentiality clause which prohibits them from disclosing the sum of money involved”.
- This seems rather strange considering that Mobil Nigeria Plc (the asset being sold) is a publicly traded company.
- However, unconfirmed reports suggest the deal might be worth about $500 million or N125 billion.
- As mentioned Mobil share price is currently valued at about N68.5 billion. However, stock market valuations are typically about the company’s earnings.
- Thus, this does not take fully into account the value of its legacy assets (such as real estate and brand equity).
- As mentioned, Mobil Real Estate alone is worth about N47 billion. Add that alone to the market valuation, you’ll get about N115 billion, still far off the N125billion valuation for just 60% equity.
- Some other analysts believe Mobil is probably worth about 20x it’s 2015 earnings which takes the market valuation to about N135 billion and almost N200 billion if we include real estate and brand equity.
- We also understand that part of the deal will allow for a transitional management of both parties for the time being, meaning NIPCO will take-over sometime in 2017.
- Nipco will continue to maintain the Mobil brand on its retail outlets as well as continue to blend and sell the Mobil brand of lubricants under Branding Licence (s) from Exxon Mobil, which as mentioned earlier is a factor that will be considered when valuing the business.
- Both companies are said to have signed a Sale And Purchase Agreement and await regulatory approval from the Securities and Exchange Commission and the Nigerian Stock Exchange.