Transcorp plans N1.8trn listing of power subsidiary

Adebisi Aikulola
Adebisi Aikulola

Transnational Corporation of Nigeria, the country’s biggest conglomerate by market value, will list the shares of its spinoff power generating arm, Transcorp Power, by way of introduction in Lagos on Monday, the Nigerian Exchange Limited said in a Friday statement.

The plan is for 7.5 billion shares to be quoted at N240 per unit, putting its valuation at N1.8 trillion.

Meanwhile, Transcorp which also has hospitality, agribusiness, and real estate among its subsidiaries, and is the parent company under which Transcorp Power operates, is valued way below the power-generation arm at just N580.5 billion.

Analysts say that makes Transcorp Power appear overvalued, at N1.8 trillion, and its share price somewhat bloated.

Transcorp did not immediately respond to NewMailNG query, seeking clarification on how the corporation arrived at N1.8 trillion valuation and whether it considers the N240 as a fair value.

“Generally speaking, sometimes it does happen that the spinoff may be more valued than the entire group. I am not speaking in terms of Transcorp,” Syvelster Anaba, research team lead at investment bank Meristem Securities, told our correspondent.

“Let’s say you have three or four different companies making up a group. The overall valuation would be an aggregate of the three, four, and five companies that make up the group. If there are two, three parts of the group that are not doing very well, it would end up affecting the final valuation of the entire group. If it is that there is one company in the group that is doing very well, that may not be so pronounced in the entire valuation of the group.”

With a total installed capacity of 2000 megawatts, Transcorp Power runs the 972-MW Ughelli plant, 966-MW Transafam Power Limited, according to information on its website.

The potential value of Transcorp’s power generation business has drawn increased interest from two of Nigeria’s most prominent billionaire tycoons last year, prompting a botched bid by Femi Otedola, the majority owner of rival Geregu Power and chair of FBN Holdings, to become the company’s top shareholder.

One big boost to its prospects in recent years was the proposal in 2021 to develop nuclear power plants as alternative power generation for Nigeria, the first of its kind in the electricity-starved nation.

“We are delighted to see this innovation and appreciate Transcorp for leading the charge in the industry with this initiative,” former Minister of Science & Technology Ogbonnaya Onu said at the time.

“The approach by Transcorp to use small scale nuclear plants is catalytic for achieving the national goals in science and technology,” he added.

Rival Geregu Power, which listed its shares less than two years ago, has returned 145 percent this year alone, making it the second top-performing stock of the 153 equities quoted on the NGX, a likely motivation for Transcorp to spin off its power-generation division and list it as a separate entity in order to unlock value.

Last year, Otedola purchased Transcorp shares in piecemeal off-market transactions summing up to 2.6 billion units or 6.3 per cent, pushing into the shade the 2.07 percent interest held by Tony Elumelu, Transcorp’s top shareholder until that time.

That triggered a wild rush for the company’s shares within days, during which Elumelu raised his stake to more than a quarter of the entire conglomerate’s total shares.

Otedola offloaded his stake to the Transcorp chair in the days that followed after negotiations between the two.

Just as Otedola is the biggest shareholder of Geregu Power and chairman of one of Nigeria’s biggest five banks, Elumelu is the biggest shareholder of power-focused Transcorp and chairman of United Bank for Africa, also one of Nigeria’s biggest Banks.

The scramble was a big boost last year for Transcorp, whose valuation accelerated seven times over, making it Nigeria’s fourth best-performing stock.

Transcorp Hotels, the group’s separately-listed hospitality business, was the best-performing stock for the year, appreciating by 1,023 per cent.
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