The US multinational oil and gas business Exxon Mobil Corporation (NYSE:XOM) has decided to sell their majority stake in its Nigeria business to a local company. MON or Mobil Oil Nigeria is one of Exxon’s three affiliates in the country. The Nigerian affiliate has confirmed the sale, but the financial details were not released.
However, according to some observers, Exxon Mobil was able to sell their stake at a huge markup over the current market valuation of their Nigerian arm.
Nigeria is an oil-rich country. The country has one of the richest deposits in the world. Exxon, on the other hand, is the world’s leading publicly traded oil and gas business.
Nigeria – the largest crude oil producer in Africa
However, the continent’s largest crude oil producer, Nigeria, was overtaken by Angola recently as oil output has come down with renewed unrest in the country’s delta region. The Nigerian economy is in recession too. One reason for this is because of the dropping crude prices since the last couple of years.
However, Exxon Mobil Corporation (NYSE:XOM) says that the sale decision was not because of the unrest in Nigeria or the country’s business climate or financial results. It was due to strategic reasons.
Local Nigeria Business Buys Exxon Stake
A company statement said that Exxon’s 60 percent shares in its Nigerian arm Mobil Oil Nigeria have been sold to Nipco Investments. An agreement has been signed after the shareholders of both the businesses approved this deal. Regulatory approval is pending, though. The country’s stock market, which is located in the capital city of Lagos, has also been informed about the decision.
The Managing Director of Nipco, Venkataraman Venkatapathy, issued a statement saying that “We are confident of adding tremendous value to MON and likewise MON will add a huge value to Nipco”. It is “an important synergy”, he says. Nipco has offices in Lagos, Abuja, and Benin City in Nigeria, and offers retail oil, CNG, and LPG.
According to the agreement, the Mobil brand will be maintained and sold through their retail outlets. Nipco will also sell Mobil lubricants under a licensing agreement.
The sale was actually made to Nipco Investments, which is a wholly-owned subsidiary of Nipco Plc. With this, they will now have directly or indirectly a 65.5 percent hold on the leading downstream marketer.
The Exxon Mobil stock was unaffected after the disclosure. It closed 0.05 percent up at $ 87.21.