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Stellantis: Fiat and PSA Group to finalise merger

Fiat Chrysler and PSA expect this merger to deliver greater resources to compete with electric-car upstarts and tech-industry interlopers.

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Fiat Chrysler Automobiles NV and PSA Group will get shareholders to sign-off a deal that has endured two years of extraordinary drama.

Negotiations have been marked by on and off talks regarding the transformation of their companies, while the global pandemic also shaped forecasts along the line.

The two companies overcame plentiful and prodigious hurdles to get the deal across the line, with Fiat even managing to patch things up after a short-lived attempt to join forces with PSA’s arch-rival, Renault SA.

READ: Airtel and Telkom discontinue merger plans

What this means

It is expected that the deal responds to growing pressure to pool resources together for product development, manufacturing and purchasing, to free up money for big bets on electric cars and self-driving systems.

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With the merger resembling Volkswagen AG and Toyota Motor Corp, Fiat Chrysler and PSA executives expect this merger to deliver greater resources to compete with electric-car upstarts and tech-industry interlopers, which may boost returns.

READ: Access Bank recover N14 billion in bad loans after merger with Diamond Bank

Despite the advantages, there may be challenges once the deal is done.

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Being bigger doesn’t spell success, GM has retrenched from many markets to focus on North America and China; while Renault and its alliance partner, Nissan Motor Co. are restructuring after racking up huge losses. Tesla Inc. is now far more richly valued than VW, which is staging the biggest effort among the incumbents to electrify its vast fleet.

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READ: CAP Plc set to merge with Portland Paints and Products Plc

Stellantis will be an amalgam of model lines with enviable positions in certain segments and areas of the world, but neither company has much of a foothold in the luxury-car business or China’s vast auto market.

Recall that the merger of Fiat with Chrysler did little to improve the fortunes of the Alfa Romeo and Maserati luxury lines, while PSA’s purchase of Opel only made the company more reliant on Europe’s crowded and shrinking market.

Carlos Taveres, the CEO of PSA, thus, have much to do in terms of shaking up Stellantis’s portfolio.

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READ: Federal Government issues Merger Review Regulations 2020

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What they are saying

According to Jefferies Analyst, Philippe Houchois,

  • “Stellantis will be a sort of conglomerate of brands, some great and some not so good and most very regional. The merger will be a good opportunity for a reset. The auto industry has been chasing size and consolidation for years, but it’s been slower in coming than many would like to see. The question is whether GM, Toyota and Renault-Nissan have provided evidence that there may be limits to this strategy.”

READ: New competition for Innoson as Renault re-enters Nigeria’s automobile market

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What you should know about the merger

  • The combined company will have presence in North America’s lucrative truck and SUV segments, thanks to Fiat Chrysler’s Ram and Jeep divisions. PSA’s revitalized Peugeot and Citroen brands have excelled in Europe and are the envy of its turnaround-minded French foe, Renault.
  • Fiat Chrysler shareholders are being paid a pre-merger dividend of 2.9 billion euros ($3.6 billion).
  • The boards of both companies also are considering a potential distribution of 500 million euros to each company before they close the deal, or 1 billion euros afterward to shareholders of the combined entity.
  • The Agnelli family that controls Fiat Chrysler, led by Chairman John Elkann, agreed in September to shave 2.6 billion euros off the initial dividend the carmaker’s shareholders will receive, to give Tavares more cash to work with when he takes the helm of Stellantis.
  • Fiat Chrysler and PSA raised their estimate for the annual synergies Stellantis will achieve to 5 billion euros, putting more pressure on Tavares to squeeze out efficiencies. The companies had previously said they would be able to extract 3.7 billion euros in yearly savings without closing any plants.
  • PSA Group is a French multinational manufacturer of automobiles and motorcycles. With its three world-renowned brands, Peugeot, DS and Citroën.

READ: Sanwo-Olu launches Nigeria’s first electric car, to complete Lagos-Badagry expressway

Adeyemi holds a PhD in Accounting Sciences. He has worked in the Educational Sector and as an Independent Consultant.

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Corporate deals

FMDQ Securities Exchange admits Total Nigeria Plc and 2 others CPs

FMDQ has announced the admission of three new Commercial papers.

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AFEX to partner with FMDQ and Dubai Commodities Exchange

FMDQ Securities Exchange Limited has announced the quotation of Total Nigeria Plc, Mixta Real Estate and Valency Agro Nigeria Limited Commercial Papers under its platform.

According to the News Agency of Nigeria, the disclosure was made by the FMDQ Group in a corporate statement issued, sequel to the fulfilment of all regulatory requirements.

  • The statement explained that FMDQ admitted Total Nigeria Plc., N2.25 billion Series 1 and N12.75 billion Series 2 Commercial Papers (CP) under its N30 billion CP Issuance Programme.
  • It also approved the quotation of Mixta Real Estate Plc., N2 billion Series 32 CP under its N20 billion CP Issuance Programme.
  • In the same vein, the FMDQ Group also approved the registration of Valency Agro Nigeria Ltd., N20 billion CP programme on its platform.

What they are saying

Commenting on the quotation of the issue, the Managing Director of Total Nigeria, Mr Imrane Barry, explained that:

  • “The programme was set up to enable the company further broaden its sources of capital by accessing funding from the Nigerian debt capital markets, while also reducing its overall funding costs.”

In his remarks, the Managing Director, Valency International Pte Ltd., Mr Sunil Dhanuka, said:

  • “We are glad for the successful registration of Valency Agro’s, N20 billion CP Issuance Programme. In line with our vision to grow within the agricultural value chain in Nigeria, Valency Agro is committed to ensuring the growth of the agriculture sector through our deep involvement in Cashew, Sesame, Cocoa and other produce.
  • “Proceeds from this CP Programme will be used toward meeting the midterm working capital requirements of the various agricultural produce and on value addition prior to export.”

What you should know

  • Nairametrics reported the admission of Axxela N11.5 billion bond on FMDQ platform.
  • Total Nigeria Plc had earlier issued a debut commercial paper, which was aimed at supporting the sector and reactivating the economy. This CP was halted by the COVID-19 pandemic.
  • Despite the disruption, the debut issuance attracted sizeable demand from a lot of investors, leading to oversubscription.
  • The financial advisers of the debut issuance scheme are Stanbic IBTC Capital Limited and FBNQuest Merchant Bank Limited.
  • Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations (for example, payroll) and is backed only by an issuing bank or company which promises to pay the face amount on the maturity date specified on the note.

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Corporate deals

DEAL: Heirs Holdings acquires 45% of OML 17 from Shell, Total and Eni

Heirs Holdings has acquired 45% of OML 17 from Shell Nigeria as part of its expansion into the oil and gas industry.

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UBA’s Tony Elumelu, Wizkid

Heirs Holdings has expanded its Oil and Gas portfolio, as it acquired 45% of OML 17 from Shell Nigeria.

The company acquired related assets, through TNOG Oil and Gas Limited (a related company of Heirs Holdings and Transcorp), from the Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and ENI.

This was disclosed by the company in a statement issued on Friday and seen by Nairametrics.

According to the statement, TNOG Oil and Gas Limited will have sole operatorship of the asset in a transaction that is one of the largest oil and gas financings in Africa in over a decade.

  • “With a financing component of US$1.1 billion, provided by a consortium of global and regional banks and investors. OML 17 has a current production capacity of 27,000 barrels of oil equivalent per day and according to our estimates, 2P reserves of 1.2 billion barrels of oil equivalent, with an additional 1 billion barrels of oil equivalent resources of further exploration potential. The investment demonstrates a further important advance in the execution of Heirs Holdings’ integrated energy strategy and the Group’s commitment to Africa’s development, through long term investments that create economic prosperity and social wealth.”

What they are saying

In the statement, Chairman of Heirs Holdings, Tony Elumelu, said:

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  • “We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.
  • “As a Nigerian and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. We see significant benefits from integrating our production with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.”

The President and Group Chief Executive Officer, Transcorp, Owen Omogiafo, explained that the deal further demonstrates the company’s integrated energy strategy and its determination to power Africa.

  • “Heirs Holdings was advised by Standard Chartered Plc, as Global Coordinator, and United Capital Plc, with a syndicate of lending institutions including Afreximbank, ABSA, Africa Finance Corporation, Union Bank of Nigeria, Hybrid Capital, and global asset management firm, Amundi. The deal also involves Schlumberger as a technical partner, as well as the trading arm of Shell as an off-taker.
  • “Heirs Holdings has created one of Africa’s largest, indigenous owned, oil and gas businesses, headquartered in Lagos, Nigeria and led by a board and management team with significant regional and global experience in production, exploration, and value creation in the resources sector.”

What you should know

  • Two years ago, Nairametrics reported that Elumelu’s Heir may acquire Shell, as the Royal Dutch Shell Plc was reportedly considering the possibility of selling its two oil mining licenses in the oil-rich Niger-Delta.
  • According to reports, Heirs Holding Ltd was already raising funds to acquire the two oil mining licenses 11 and 17 valued at $2 billion. The assets include a natural gas-fired power plant which will be managed by Transnational Corporation of Nigeria Plc.
  • Transnational Corporation Plc in its Half year results for the period ended 31 June 2018, recorded a 44.8% increase in revenue from its Power segment of operation from N27.97 billion in half-year 2017 to N46.08 billion half-year 2018. The largest of its five revenue segments.
  • According to the report, the decision to sell off these assets is triggered by the continued unrest in the oil-rich region and age long accusation of environmental pollution levelled against the Dutch oil firm.
  • Shell has over the years faced stiff opposition in operating within the Niger-Delta region, with several reports of pipeline vandalism and youth restiveness in the region. This situation has left the oil company with undeveloped oil and gas reserves.

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Corporate deals

Deal: Ardova to acquire Enyo

Ardova Petroleum Plc (AP) has announced plans to acquire oil and gas retail outlet Enyo Retail and Supply Limited

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Olumide Adeosun, Forte Oil Plc,

Ardova Petroleum Plc (AP) has announced plans to acquire oil and gas retail outlet Enyo Retail and Supply Limited. This was announced via the website of the Nigerian Stock Exchange on Wednesday, January 13, 2021.

Nairametrics reported in September 2019 that Ardova had obtained its board approval to acquire downstream assets in the country in line with its expansion plans.

According to the information contained in the press release, Enyo accepted Ardova’s acquisition offer in a deal that is still subject to completion of a due diligence exercise and the receipt of all required regulatory approvals.

Ardova share price rallied during the day as news of the deal reached some investors and closed at N20 per share. The share price of Ardova has rocketed this year gaining 47.6% year to date as of Wednesday.

This will be the second major acquisition by Ardova Plc after its majority shareholders Prudent Energy Services, using a vehicle Ignite Investments and Commodities Limited, acquired majority shares in Forte Oil Plc from billionaire Femi Otedola in 2019. In the 2019 deal, Mr. Otedola sold 970,166,694 units of Forte Oil Plc in off-market trades at a price of N66.25 per share and valued at about N64 billion. Ardova share price was about N32.3 per share when it was acquired by Prudent Energy Services.

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The CEO of Ardova Mr. Olumide Adeosun informed the Exchange that immediately following completion, AP will look to retain the Enyo branded stations which will operate side by side with the AP brand “whilst leveraging the strengths of AP and its group companies” in a move that is typical with such acquisitions.

Enyo was established in 2017 as a downstream energy player and is majorly owned by Folawiyo Energy, a notable player in the oil and gas industry. The Chairman of ENYO is Mr. Tunde Folawiyo. Ardova indirect majority shareholder Prudent Energy Services is owned by a Nigerian businessman and oil mogul Abdulwasiu Sowami.

Ardova reported a profit after tax of N1.8 billion in the first 9 months of the year compared to N2.5 billion the year before. Full-year profit in 2019 was N3.9 billion and it is very likely profits will fall when the company reports its results this year.

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