Posted by 9jabook.com on August 16, 2009 at 9:19am
It has been the most famous duel in Nigerian corporate history, and it is ending with what may be the most famous reconciliation. Bosom enemies; Bitter friends, Huhuonline.com can authoritatively report that Nigeria’s richest duo; Alhaji Aliko Dangote and Chief Femi Otedola have decided to bury the hatchet, untangling the love-hate relationship between the two oligarchs that has brought their financial empires to the brink of total ruin.
The reconciliation, at the instance of Nduka Obaigbena, Editor-in-Chief and Chairman/CEO of This Day newspaper followed months of tortuous negotiations as friends of the two erstwhile billionaires battled desperately to reconcile the two men in the wake of a campaign of vilification and personal destruction waged by their surrogates in the media.
Sure, it has been a harrowing storm which left several casualties in its wake. Even President Umaru Musa Yar’Adua could not have been indifferent. In one of several efforts to break the ice, Yar’Adua directed his predecessor; Obasanjo to get the duo involved in a Nigerian delegation to canvass foreign investments in the UK. During the said meeting, the two men refused to shake hands.
In appearances before the House of Representatives Committee on Capital Market investigating the AP shares scam, the two men were “forced to shake hands and refer to each other as “my brother” but reconciliation remained elusive. It has taken a lot of water going under the bridge and the unbending resolve of personal friends like Nduka to broker a peace deal between the two men.
Now therefore, is no time to discount the dangers that still exist. But opening your mind to optimism can help you seize the opportunities ahead In the darkest hours of the bitter and sometimes acrimonious schism between Dangote and Otedola, Nduka Obaigbena found reason - even if unfounded - for hope that the two erstwhile friends could be reconciled. And he spared no effort working behind the scenes, using personal communication channels to reach out and bridge the gap of animosity between the two men. Yesterday’s breakfast at his Lagos residence was the climax of all his efforts.
A source close to Nduka told HuhuonIine.com that “I don't expect all the hard feelings to disappear overnight, nor do I believe that all the wounds and scars will suddenly vanish. But I do believe that if the two men can talk to one another openly and honestly, then perhaps old rifts will start to mend and new partnerships will begin to emerge that will crowd out the destructive forces of zealotry and make room for the healing power of understanding. This is my hope. This is my prayer.”
Distrustful of each other's intentions yet longing at some level to reconcile, neither Dangote nor Otedola knows how this story will end. But the least common denominator of the dynamics of this crisis that has made screaming media headlines and caused Otedola his place on the Forbes list of billionaires made reconciliation more than just a compelling commonsense imperative. If anything, it has been a race to the bottom of mutually assured destruction that spell doomed for their business interests and the Nigerian economy.
Anatomy of a Schism
No one is very certain when the personal war started, but the friendship between the two men came under unusual strain when billionaire industrialist, Alhaji Aliko Dangote, noted for his near monopoly in the sugar and cement business in Nigeria, decided to step into Chief Femi Otedola's equally near monopolistic oil, albeit diesel, turf using a consortium that included his family investment firm, MRS Holdings, managed by his cousin, Sayyu Dantata to outbid Otedola's company to take over Chevron's investment in Texaco’s local and West African downstream operations.
MRS reportedly paid $1 billion for Chevron's West Africa division, as against Otedola's $200 million for the Nigerian operations. It is alleged in Otedola's camp that Dangote broke a gentleman's agreement that the duo should not stray into each other's main area of operation. Corlay Global SA, a Panamanian company owned by an African consortium, comprising Dantata's MRS Holdings and Petroci Holdings, won the bid.
Otedola's Zenon had over time, mopped up 22% equity of Texaco on the floor of the Nigerian Stock Exchange, in preparation to taking control of the oil firm's majority shares. But that was not enough to upstage Dantata, who eventually acquired 60% shares by out-bidding him.
Reports had it that a dissatisfied Otedola had to no avail, approached Dangote, as a friend and cousin to Dantata, to intervene in the matter, interpreting MRS' bid as a challenge, especially as Dangote is said to control 80% of its equity. A source alleged that Otedola was piqued that he had been confiding in Dangote of his plans to take over Chevron, not knowing that his friend actually planned to beat him to it through his cousin. He was said to have felt betrayed by Dangote's intent and approached a court to thwart the sale of Chevron's Texaco stakes to MRS.
To prove his ability to fight back, the diesel magnate allegedly launched into Dangote's enclaves of cement and sugar business. Otedola got an injunction from a Nigerian court to block the sale, alleging that the new owner would be taking on too much debt and could end up cutting jobs. But Chevron fought back, describing the injunction as political and invalid, being registered and taxed in Bermuda. In February, an appellate judge modified, but still upheld the ban.
Further to his move into Dangote's fiefdom, Otedola declared plans to invest $2 billion in sugar and cement production; just a day after Chevron sealed the deal regarding the sale of its Nigerian downstream operations to MRS. In November, the Security and Exchange Commission (SEC), Nigeria's securities regulatory agency, froze the assets of African Petroleum (AP), for which Otedola accused Dangote.
All of a sudden, the shares of AP started plunging on the floor of the Nigeria Stock Exchange (NSE), following share movements or what capital market operators call crossing. AP shares lost over 80% value in a space of about eight weeks, prompting the oil firm to place advertorials in several Nigerian mainstream newspapers, accusing companies owned by Dangote and broker, Nova Finance and Securities of share manipulation.
AP, in the advertorials signed by its management, accused companies affiliated to Dangote, and Nova of engaging in "certain unwholesome and unethical activities." The management of AP attributed the share value deflation to the ongoing feud between Dangote and its chairman, Otedola. At its peak, AP shares sold for N239, but fell below N60 per share during the period.
In February last year, a report by Forbes, which only a few weeks back rated Otedola as the second Nigerian, behind Dangote, on its world billionaires' list, stated that Otedola’s fortune was down to approximately $500 million, from $1.2 billion.
The rift also took a toll on Nova, which was suspended and fined by the SEC. The regulatory agency said Nova breached SEC's regulation that precludes dealing members from creating a false market on a specific security to effect a change in its share price. The SEC equally fined AP N300, 000 for the advertorials alleging manipulation of its shares, rather than first reporting the matter to it. Mr. Musa Al-Faki, the Director-General, Securities and Exchange Commission (SEC) resigned his appointment.
But Dangote (who then doubled as NSE vice president) and his associates frowned at the continuing AP advertorials, which came despite the pronouncement by the NSE sanctioning AP for the initial ones and ordering immediate cessation of the publication.
The feud came to a head when Otedola petitioned the Economic and Financial Crimes Commission (EFCC), accusing Dangote of using his firm, Novas Securities, to crash AP shares on the Nigerian Stock Exchange. Dangote was reportedly quizzed by the EFCC on account of that petition.
Not long after, some advertorials accusing Otedola of manipulating Dangote shares also surfaced. Penultimate week, Prize Communications, a media consultant to Otedola’s business interests was dragged before a Lagos court on a four-count charge of libel, defamation and likely breach of peace, by the police at Dangote’s instance over the Facts Magazine publication.
Dangote had complained that the publication damaged his person and businesses. Last week, he similarly instituted a N1billion suit against National LIFE for publishing materials he considered “injurious” to him.
A group under the aegis of Committee for the Defense of Justice and Advancement (CODJA), in an advertorial signed by one Bamidele Sanya, expressed concern over the worries of some stakeholders of AP regarding the share value deflation. AP shares were placed on technical suspension, following its public offer for an unusually long period of nine months. During this time, the global economic crisis struck and investors were unable to realize the substantial gains they made as the price was rising.
The Committee for the Defense of Justice and Advancement noted that, between January 16 and February 10, AP shares fell from N298.98 to N216.13, a drop of N77.85, representing over 26%. During this period, Nova did not conduct any transactions involving AP shares, insisting that the price fell with no involvement or activity by Nova on the stock.
The group further stated that during the period Nova actively traded AP stock, the price fell by a further 33 per cent, from N105.45 to N69.99 and that there were a total of 132 transactions on AP shares during that period, most of which did not involve Nova. It contended that in comparison with the rest of the industry, AP's share price declined by 82% while the average price drop of other oil marketing companies - Chevron (76.6%) Oando (63.9%) and Total (51.5%) - over the same period was 65% against an overall NSE index reduction of 53.2%.
It reckoned: "Despite experiencing significantly more volatility than its peers, due to the company's recent equity offering and change in free float, AP's performance from January 2007 to date is fundamentally in line with its peers… It is disingenuous of AP to cry wolf when it feels it is the victim of stock decline, but to feel it is perfectly acceptable for the stocks to rise astronomically.”
"In other words, AP shares have performed in line with the market and the alleged manipulation that took place would have been counter-productive in the extreme, if intended to willfully force the fall in AP's share price, the market would have done the job on behalf of the alleged perpetrators, with or without illicit action."
It then wondered what the motivation was behind AP's decision to make public the allegations and "to willfully and knowingly violate NSE rules and regulations itself in the process. Has the Management of AP just woken to the realization of its duty to always inform its shareholders about the true position of things relating to the company?"
They therefore urged the management of AP to desist from peddling half-truths concerning the decline of its shares value and attributing it to the seeming disagreement between its boss, Otedola, and Dangote.
All Roads lead to Otta
Seen to share a common belief of reducing poverty in Nigeria through their companies, the rift between the two men could not have been settled without input from Otta, the Ogun State abode of their godfather, Olusegun Obasanjo.
During the administration of former President Obasanjo between 1999 and 2007, Dangote, then a commodities trader, secured near-monopolies in cement, sugar and salt supplies, which he used to transform his import-export firm, Dangote Group, into a manufacturing conglomerate.
About the same time, Otedola, son of former Lagos State governor, Sir Michael Otedola, who was managing his family's business, launched Zenon Petroleum in 1999 and almost immediately took monopolistic control of the diesel business, allegedly with the tacit backing of Obasanjo.
The two had substantial chunk of government-divested interests when the Obasanjo government off-loaded state-owned companies and corporations and were members of the board of a key government-business committee.
In 2007, Dangote and Otedola floated a consortium, Blue Star oil Services Limited, with which they bided and finally bought the Port Harcourt and Kaduna Refineries, although it was later alleged that Otedola's name was conspicuously missing in the firm's board of directors. A price war was expected when Zenon products arrive in the markets. Incidentally, Dangote applied the same strategy when he made his entry into the salt, sugar and cement markets.
Otedola allegedly pumped huge sums of money into the building of his sugar refinery and cement factories. He became the chairman and chief executive of AP in September 2007 when he acquired 12.5% of its shares. His Zenon bought over most of the 28% Nigerian National Petroleum Corporation (NNPC) stake in the firm.
Over the last 10 years, the bond of friendship between Dangote and Otedola was strengthened by a string of business partnerships, some overt, others clandestine, especially in oil deals, with the support of Obasanjo, believed to be their common godfather.
In April last year, on the eve of Obasanjo's exit from Aso Rock, the duo formed Blue Star Oil Services consortium to buy 51% controlling shares in the 210,000 bpd capacity Port Harcourt and 110,000 bpd Kaduna refineries for $721million.The sale generated so much public outcry, particularly concerning its alleged undervaluation and circumstances, coming barely a few days to the end of the administration that the new government of Yar'Adua had to cancel the deal two months after assuming office.
Dangote and Otedola contributed substantially to the financing of Obasanjo's election in 1999, doling out about N150 million. In return, they were rewarded with juicy deals, especially in the lucrative oil and gas business. From then on, they became not just the country's denominating factors in the economy, but also virtually had their way in any business they cared to dabble into. Some other businessmen saw them as merely being favored by the former President, even against all odds, while others believed they were mere fronts.
For Obasanjo's re-election bid, when the funds seemed to be drying up, Dangote and Otedola readily came to the rescue, pumping in billions of naira into the project, realizing its worth. They were visible and donated heavily towards the Obasanjo Presidential Library project in Abeokuta, Ogun State. It is alleged that they even provided financial backing for the infamous Third Term project aimed at extending Obasanjo's tenure beyond 2007.
Within the Nigerian business circles, it is alleged that the duo benefited more than anybody else from the Obasanjo administration, especially in the importation of petroleum products and cement, a major component in the building and construction industry.
When the federal government's controlling stake in AP came up for grabs in 2006, after it had been taken away from Chief Peter Okocha's Sadiq Enterprises, following the discovery of some hidden liabilities to the NNPC at the point of sale by BPE, billionaire investor and chief executive of Global Fleet Oil and Gas, Chief Jimoh Ibrahim was said to have moved to purchase the stakes by allegedly issuing a cheque for N18.5billion to the NNPC for the purpose.
But Obasanjo thwarted this attempt and had it sold to Otedola for about N17billion, N1.5billion less than what Ibrahim offered. Otedola soon increased AP's operations remarkably, just as the firm's stock rose to a peak of N293, making it one of the most priced in the country. But it nose-dived as the personality fight raged.
To many Nigerians, the fight of these two elephants was just another bad deal gone sour between two friends. But being two major investors in Nigeria, whose stake in the economy is enormous, the fight between them spelt danger for the Nigerian economy, considering that others have stakes in their companies too.
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