Article Summary
- The Chairman of Transcorp Plc, Mr. Tony Elumelu, confirmed plans to list Transcorp Power in five years, provided transmission lines and gas supply to the power sector improve significantly.
- A potential spin-off of Transcorp Power is seen as a way to extract value from the company, with the power business accounting for 86% of the group’s profits.
- Nairametrics estimates the value of the power business to be worth as much as N480 billion on a multiple of 20x.
- He also for the first time responded to the 5.53% acquisition of Transcorp Plc by Femi Otedola.
The Chairman of Transcorp Plc, Mr. Tony Elumelu, confirmed plans to list Transcorp Power in 5 years.
Mr. Elumelu made this comment in an interview with Arise TV when he was asked about rumors of a potential spin-off of Transcorp Power Plc following a board resolution passed at the conclusion of its Annual General Meeting (AGM).
Elumelu also denied rumors that he planned to list Transcorp Power as a separate institution on the Exchange, stating that the conglomerate was in it for the long term.
“No (we are not listing), I hear that rumor from time to time, especially after some competing institutions were listed on the Exchange. No, we are long-term players, we want to grow more and significant value in the power sector.” Elumelu said.
He, however, proceeded to confirm that a spin-off was on the cards, albeit in 5 years time, on the condition that transmission lines and challenges with gas would have been fixed.
“We are looking at about 5 years from now to list Transcorp Power because we believe the transmission lines would have been fixed and the gas supply to the power sector would have improved significantly,” Elumelu said.
Potential Impact of a Spin-off
Transcorp Plc also spun off Transcorp Hotels as a separate entity from the group in 2015 via an initial public offering. The company was listed at a price of N10 per share. The current share price of the company is N7.14, and it is valued at N73 billion.
Transcorp Plc, on the other hand, is valued at N109.3 billion currently, a huge spike from the N50 billion it was valued at just a few months ago. The share price of the group has almost tripled since January 2023 and surged after Nairametrics reported Otedola’s stake in Transcorp.
A potential spin-off of the Power Group is perhaps expectedly seen as a way to extract value from the company. Geregu Power, which is majority-owned by Femi Otedola, was listed on the NGX in 2022 and was valued as high as N800 billion at some point this year.
Mr. Otedola is also now an investor in Transcorp Plc with about 5.52% shareholdings officially.
However, spinning off Transcorp means the group will be left with its agro and oil and gas entities, which are currently not profitable. The power business, for example, reported a profit after tax of N24.1 billion, representing 86% of group profits. On a multiple of 20x, the power business can be worth as much as N480 billion.
Response to Femi Otedola’s acquisition
Elumelu also commented on the huge volumes of trades being experienced on Transcorp stocks since the acquisition by Femi Otedola. In his response, he cited his Friendship and administration with Mr Otedola stating that he welcomes his investments.
“I am happy to see an indigenous active investor community and I am happy that Femi is investing locally and should be commended for that.”
Nairametrics earlier reported trade volumes of about 5 billion units exchanged hands in yet another off-market trade at the same price of N2.45 per share.
Mr. Otedola is yet to respond to comments from the interview with Mr. Elumelu. However, reliable sources inform Nairametrics that he is also happy to work with Transcorp Plc.
a welcome development