MW Chairman was one of the Oando's founders?Is this common knowledge that Okoloko is one of the 3 original partners? Oando now worth several billion and raised $1.5bil last year to buy the Conoco Phillips Nigerian operation. Since this is in addition to the $1.5 bil Okoloko raised to greatly increase the size of his Fertilizer and chemical plant. so Isn't this MMT peanuts for him?
Wale Tinubu along with Onajite Paul Okoloko, current managing director, Notore Chemicals Industries and Mofe Boyo teamed up to establish Ocean and Oil Limited primarily to supply and trade in petroleum products. That incidentally is the same company that has today metamorphosed into an integrated energy group.
As the story goes, Wale’s mother provided the youthful trio, the initial $10, 000 fi nancial backing from which they bought petroleum products, hire tankers and sold the products gradually. As the business grew, Wale and his partners saw the need to raise the bar. A loan of $100, 000 was reportedly secured from which they decided to hire a ship. Their fi rst encounter was with “The Carolina”, an old ship to which he was reported to have formed a romantic attachment but which later put him into a cash liquidity problem. Business Courage learnt that although the ship was transporting some 1, 000 tons of diesel from an oil refi nery to Lagos every 15 days or so, payments trickling in were almost not enough to pay the overhead cost. In no time, payments to the ship owners went into arrears and at a time, the owners reportedly threatened to take back the vessel. Wale was said to have summoned the courage, reached out to his creditors and offered that he be allowed to extend his debt and buy the ship outright. This would lead to a complete transfer of ownership and remove the owner’s need to chase him around on debt. Impressed by his logic, the ship owners agreed and Tinubu went on to raise the necessary funding for the ship. He eventually became independent and later set up his own company.
Interestingly, the fi rst transaction Wale and his partners undertook under the Ocean and Oil Limited was to move petroleum product for the then Unipetrol, the company they later acquired.
Wale recalled the moment with nostalgic touch in an interview with Forbes, “the fi rst opportunity we had was delivering fuel to companies who were going offshore to drill (offshore drilling had just started in Nigeria). The only asset we had was an old 1945 World War II tanker–The Carolina which was really slow, doing fi ve miles and if the tide was against it, it would go backwards. But we got things delivered on time in an environment where things were always late (drills are late, buses are late). Being able to display fi rst-world perspectives on certain delivery techniques got us a lot of clients. We took risks along the value chain and in most instances had to build the infrastructure, be it pipelines. Additionally we also had to create a regulatory framework which did not previously exist. For example, in Lagos, we built 130 kilometers of pipelines however the existing documentation with the regulator only accounted for 30 or 40 kilometers. We could not let that stop us from continuing to build because if we did not build, demand would be unmet. We decided that we could not allow the lack of a regulatory infrastructure hinder our ability to build further. I learnt that, regulations, particularly in our region, catch up with you as you go along. Most times you have to create an environment by developing the regulatory framework that you are judged by and often times it is an ever-evolving framework”.
What today stands as the multi-billion dollar energy group indeed started just by running errands for the big trading companies in the oil industry. It provided haulage facilities for oil marketing companies and later sold products on behalf of major oil marketing companies when they could not take the products into their system. That was the major pre-occupation of Ocean and Oil and they did that for about six years when a major breakthrough came their way.
All the time they were involved in petroleum product haulage, the trio had their eyes set on the future. Daring and ambitious, those close to them say the trio were quick to identify business opportunities and never let them sliped through their fi ngers. As such, when in 2000, the government of former President Olusegun Obasanjo decided to privatised some of the government business interests, including the oil marketing companies, Wale and his partners went for the kill.
They bided for 30 percent equity in Unipetrol, the company in which they were hitherto, a major contractor and rallied round to source $16m with which they bided for and acquired 30 percent stake in a company whose market value as at then was valued at $30m.
Reminiscing on the deal that saw Ocean and Oil clinched the Unipetrol deal, Wale admitted that he was lucky enough to have started the business with his colleagues at the point in time when the tide was changing in Nigeria, when the government decided to privatise. “Privatisation in certain countries like England is about raising money for the Government. In Nigeria, it’s entirely about effi ciency; well, more than effi ciency, it was about survival… We had a nation state that was growing by fi ve percent every year, we had a population of 140 million people, we had power requirement of 15,000mw, yet we produced 5,000mw. We had petrol queues, huge shortages, housing shortages. And the only way the Government realised we could do it was to sell the companies… The company which we acquired was SO’s former downstream assets; we paid $16m for a 30 percent stake. The company’s market value was about $30 m, and we’ve been able to grow that business. The group has a market capital next to a billion dollars today and we’ve been able to achieve this literally from about 15 years of operation from the start,” he once told cable news.
Expectedly, Ocean and Oil’s acquisition of Unipetrol shocked many, including the shareholders and workers of the oil marketing company who could not believe how a fi rm that had almost relied exclusively on patronage from Unipetrol turning full circle to become its eventual owner. But even before the dust aroused by the purchase could settle, Wale, an aggressive deal broker, launched another attack on another oil company, this time, Agip Nigeria Plc. A successful bid for the Italian company gave 60 per cent equity to Ocean and Oil Limited. The deal was brokered for $74 million.
Like it happened when it acquired Unipetrol, Ocean and Oil’s takeover of Agip was also visited with serious resistance. Shareholders kicked against the purchase and got “a stay of execution” order from the court on the deal. Wale and his team fi led an appeal and the verdict of the Federal High Court which halted the deal was nullifi ed, thus, led to the fusion of Unipetrol and Agip. This subsequently led to the branding of the new entity Oando Plc after acquiring controlling stakes in Gaslink, a gas company that is into industrial gas supply.
As it turned out, just six years after entering into the oil and gas sector, Wale led the team that struck a deal that has today remain watershed in the history of privatisation of government businesses in Nigeria.
Just like it was with his sudden appearance in the lucrative oil and gas business, Wale took the Nigeria investment community by storm when he led Oando to be the fi rst African company to get listed on the Johannesburg Stock Exchange with a market capitalization of more than three billion South African Rand. That deal, brokered in November 2005 was considered to be the biggest single listing since telecoms giant, Telkom came to the South African market a few years earlier. The feat also made the company the fi rst Nigerian company to set up a secondary listing elsewhere.
Under Jubril Adewale Tinubu’s leadership, Oando Plc has continued to experience tremendous growth both in operation and profi tability. Today, Oando Plc remains the most diversifi ed energy company in Nigeria with vast presence across the West African coastline. It presently boasts of having over 500 fuel stations with operations in Nigeria, Ghana, Sierra Leone, Republic of Benin and Togo.
What started as ordinary petroleum products haulage and marketing company has greatly transformed into an integrated energy group of companies with subsidiaries like Oando Production and Development Company, Oando Refi nery, Oando Marketing, Oando Trading Company, Oando Power Company, Oando Energy Services. Also with an oil bloc- OPL 325 it won for a fee of $50.25m, Wale and his team has transformed the group from oil marketer to an offshore deepwater oil explorer and is now the second largest oil marketing company by revenue in Nigeria.
Wale looked back at the closing year with a seeming relief, “2014 was an interesting year for us; we acquired American multinational energy company, ConocoPhillips’ Nigerian operations in a USD $1.7bn transaction. We were looking to acquire a company that was three times our size. We had to do several rounds of fundraising, which we successfully did. We did a “rights of issue” fi rst, then a private placement, and then we organized a corporate facility. We had about 5 to 6 work series running simultaneously in an environment where we were deemed not to be able to do the transaction because it was unheard of anybody in Nigeria wanting to do a USD $1.5bn or $1.7bn transaction in such a short space of time. Finance is still a challenge and has always been a challenge in Africa”.
Wale’s decision to veer into the oil sector now seemed to have been programmed by God. It was a product of deliberate decision of an ambitious young man who desired early enough to break away from the usual family tradition and carve a niche for himself. “I looked around and I asked myself, what area would get me more contacts with the rest of the world because I thought it was important to travel and have commercial interaction with the rest of the world. I picked the oil industry. It was a question of looking for an opportunity… I think I was 25 or 26 when we got our fi rst big loan which was $100,000. We had to pay 10 per cent a month in interest. I was so proud that I actually had a loan and was credit worthy. If they had asked me for 20 per cent a month, I was quite willing to go out there and fi nd the 20 per cent interest… When we said we would deliver at 3pm, our ships would be there at rigs to deliver. And every time we did that they said, well I never knew it was possible to receive your fuel at the time it was requested in Africa,” he said.
However, despite the massive success Wale and by extension, the Oando Group has achieved, the journey to the top was not all full of bed of roses. Wale and his Oando team have battled serious challenges to get to this point in their business history. The challenges of project fi nancing and corruption have stood out of the pack but at every turns, Wale, through combination of sound legal mind and shrewdness of a typical Nigerian businessman usually fi nds way out of every challenge that came his ways. But to him, the challenge lies more with infrastructure than corruption. “I think the biggest challenge always clearly was fi – nance; raising capital to do business. The demand for infrastructure and products are so high in the country. We fl are enough gas in Nigeria to power the whole of Africa, yet we don’t have enough gas pipelines feeding 160 million people that exist in Nigeria. We’ve got massive LNG plants which export gas to the rest of the world on a daily basis and bridging that gap was probably the biggest challenge we faced,” he said in a recent interview with a foreign medium.
On the other hand, Wale takes an optimistic stand on corruption, stressing that it (corruption) becomes less of a problem when a nation is liberalized, stressing that petty corruption is totally different from fundamental corruption. Wale says unlike in those days when the government provided and allocated all the resources and only asks for payment in exchange, reverting to a system which liberalizes an economy and encourages people to come and trade and build and invest, he says diminishes the scope for corruption.
For Wale, being in business goes beyond making all the ‘bucks’, but also about how one is able to effectively use his wealth to affect and transform the entire society in a better way, the more reason why he says Oando has made a commitment to making signifi cant impact in the educational sector not only in Nigeria but also across the Africa continent. Recently, he announced that the company is committing 1.5 per cent of its pre-tax profi ts in 2011, and one per cent in subsequent years to support basic education in West Africa.
The Oando group chief executive pledged the Commitment to Action during the 2011 Clinton Global Initiative (CGI) Annual Meeting in New York, United States of America on September 21, 2011. The money is fi gured to be about N1 billion in 2011. Its gross profi t for half year 2011 was N33.2 billion, meaning it is committed to delivering N498 million to education under this arrangement.