Nigeria: Femi Otedola, Tunde Hassan-Odukale, and the battle to control First Bank

By Temitayo Lawal
Posted on Friday, 14 January 2022 14:10

What is really going on in the race by many Nigerian businessmen to acquire a controlling interest in the country’s oldest bank, First Bank Nigeria Plc? In October last year billionaire Femi Otedola quietly acquired stakes worth N30bn in Nigeria's oldest and biggest financial institution by assets, First Bank of Nigeria Holdings, in an attempt to control a majority stake.

Controlling over 5% of the company shares, it seemed Otedola had become the single largest shareholder of the bank, wielding the powers to become the chairman and influence the direction of the bank through his voting power.

This wasn’t the case as the bank, through its secretary, Seye Kosoko, revealed that the chairman, Tunde Hassan-Odukale, had majority shareholding. The statement revealed that the chairman controlled 5.36% of the bank’s shares (as against Otedola’s rumoured 5.07%) through direct, indirect and third-party shareholding in the holdco.

“The first part of the shareholding classification (4.16%), are shares held directly and indirectly by Mr. Tunde Hassan-Odukale. The second part of the shareholding classification (1.20%), are shares ascribed to Mr. Tunde Hassan-Odukale due to his influence and having significant control,” Kosoko explained.

Towards the end of the year, in what seemed like a move to assert his authority as the undisputed largest shareholder, Otedola reportedly acquired at least 2.5% additional equity in the company to take his total stake to 7.57%.

Conversely, the Nigerian Stock Exchange and National Pension Commission rejected the bank’s claim that the 1.05% stake held by Leadway Pensure PFA, a company owned by Hassan-Odukale, should be counted as the chairman’s personal equity in the company. Leadway Pensure PFA itself later clarified that their shares of FBN Holdings Plc belong to the Retirement Savings Account holders. This effectively reduced the chairman’s interest to 4.31%.

Otedola has revealed that he doesn’t plan to pursue any board chairmanship ambitions but analysts have said that he can still decide who the chairman is due to his controlling voting power.

Otedola’s bullish acquisition history

Otedola has been a bullish investor over the years. He founded Zenon Petroleum and Gas Limited, a petroleum products marketing and distribution company, in 2003 to exploit the growing fuel retail business in Nigeria. He grew the company into an oil marketing giant.

After many big-ticket investments especially the $1.5bn (N193.5bn at the time) 10-bank funding to build the largest premium motor spirit storage facility in Africa in 2007, Otedola decided that it was time to take the bull by by the horn and become the leading oil marketing powerhouse in the country. His company, Zenon Petroleum and Gas Limited, acquired 28.7% equity in African Petroleum, formerly British Petroleum and one of Nigeria’s largest fuel marketers.

To become the chairman and direct the affairs of the new company, he understood he needed to acquire controlling stake.

In December 2007, he invested N40bn to acquire 29.3% of the company for himself. A combination of his personal and company’s stakes in African Petroleum gave him the 55.3% controlling stake he desired. He was consequently made the chairman and chief executive officer of African Petroleum, leading to a spike in the market capitalisation of the new company from N36bn to N217bn in six months.

African Petroleum rebranded to Forte Oil Plc in 2010.

A 2014 report by Forbes Africa celebrated his return to their billionaires list after he fell off due to the crash of crude oil prices from $146 per barrel to $36 in 2008. It explained how he paid back over $900m debt and invested in the financial sector. His investment made him Zenith Bank’s second largest shareholder, single largest shareholder at the United Bank for Africa (UBA) “and many more banks in Nigeria”.

Spotting the opportunity in the power sector after the federal government made its plans to liberalise it public in 2013, he acquired the 414MW-strong Geregu Power Plant for $132m by financing 57% of Amperion Limited, a subsidiary of Forte Oil, his company.

When he decided to sell his remaining 75% stake in Forte oil in 2019, many analysts wondered where he would go next. With his foray into the financial sector again, it is clear that the billionaire businessman isn’t retiring anytime soon.

Old bank, old battles

Unlike many of the newer banks that came after it, First Bank of Nigeria Plc does not have an individual owner.

This can lead to a constant battle to control the bank. Some of the prominent names that have at some point competed to control the banks are the late Alhaji AbdulAzeez Arisekola Alao, a renowned businessman and religious leader, Ayoola Oba Otudeko, chairman and founder at Honeywell Flour Mill Plc, Mike Adenuga, founder, chairman and CEO of Globacom, late Hassan Odukale and his sons who own Leadway Assurance Company Limited and so on.

The current feud was launched April 2021. On 28 April, a day after the Annual General Meeting of the FBN Holdings Limited, the board of First Bank Nigeria Plc, headed by Ibunkun Awosika, sacked Dr Adesola Adeduntan as the bank’s Managing Director and asked his deputy, Gbenga Shobo, to replace him.

The CBN Governor, Godwin Emefiele, was angered by the decision because he felt betrayed not to have been consulted considering the sustained help the bank had been receiving from the regulator and largely because he understood that the powers that controlled the bank were trying to circumvent the directive the apex bank had just issued to them a day before the AGM.

In the said directive, the CBN through its Director of Banking Supervision, Haruna B. Mustafa, referred to the insider lending going on in the bank especially the N75bn given to Honeywell Flour Mills, a company owned by the FBN Holdings chairman, Oba Otudeko, which it felt didn’t constitute good corporate governance.

“We further noted that after four years the bank is yet to perfect its lien on the shares of Oba Otudeko in FBN Holdco, which collateralised the restructured credit facilities for Honeywell Flour Mills contrary to the conditions precedent for the restructuring of the company’s credit facility. Given the bank’s failure to perfect the pledge and satisfy conditions for regulatory approval, the restructuring has thus been invalidated and the credit facilities now payable immediately,” the CBN said.

“Consequently, the central bank has requested that Honeywell fully repays its obligations to the bank within 48 hours failing which the CBN will take appropriate regulatory measures against the insider borrower and the bank,” they added.

Anticipating that the MD Adeduntan would not be on the same page as them because he belonged to a different shareholding camp, the board therefore decided to sack him few months before his retirement in December 2021.

In a shocking twist, however, the CBN reinstated the embattled Managing Director and then dissolved the entire boards of the bank and the holding company headed by Ibunkun Awosika and Oba Otudeko himself respectively.

“To us at the CBN, not only is it imperative to protect the minority shareholders, that have no voice to air their views, also important, is the protection of the over 31 million customers of the bank who see FBN as a safe haven for their hard-earned savings,” Emefiele said.

Bottom line

The corporate governance, regulatory oversight and financial health of a systemic bank like First Bank matters for investors. The CBN governor alluded to this in his statement, saying “the action by the board of FBN sends a negative signal to the market…”

“By our last assessment, FBN has over 31 million customers with deposit base of N4.2 trillion, shareholders funds of N618 billion and NIBSS instant payment (NIP) processing capacity of 22 percent of the industry,” he added.

Ultimately, the battle for control of First Bank will likely have minimal direct implications for the industry says Damilola Olupona, Banking Analyst at Chapel Hill Denham, a Lagos-based investment firm.

But he believes that the bank itself will be affected. “If the strategic buying of bulk shares by major investors in the bank persists, we could see the share price of the stock advance further,” he warns.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options