Royal Dutch Shell is set to sell its Permian Basin assets to ConocoPhillips for $9.5 billion in cash, an exit from the largest United States oilfield for the energy major, which is now shifting its focus to the clean energy transition.
Earlier in the year, the company likewise said it was launching a major divestment of its Nigerian assets, especially those in the shallow-water and onshore, in a deal which could be one of the hugest in the oil and gas industry in Africa ever.
The Minister of State, Petroleum Resources, Chief Timipre Sylva and Shell officials have confirmed that talks have been ongoing, although a recent report announced that some glitches were holding up the discussions.
The Nigerian National Petroleum Corporation (NNPC), a major party to the ongoing talks, last month pledged to protect the interest of Nigeria in any transaction involving international oil companies, including shell, if they are interested in divesting from the country.
Group Managing Director of the corporation, Mallam Mele Kyari, said that although the NNPC cannot stop any of the oil concerns from deciding to sell off any of their assets, but the rules must be strictly followed.
Against the backdrop of plans by Shell to fully sell off its subsidiary, Shell Petroleum Development Company (SPDC) “because the company’s future plans no longer align with the operations of the Nigerian subsidiary” the NNPC boss noted that having learnt from previous experiences.
He noted that the corporation was developing requisite divestment policies that will provide clear guidelines and criteria for exiting of partners’ interest in all its Joint Venture (JV) and Production Sharing Contracts (PSC) arrangements.
Kyari stated that Nigeria will leverage on its rights of pre-emption as well as evaluating the operational competency and track records of new partners, adding that the corporation will pay particular attention to abandonment and relinquishment costs; severance of operator staff; third party contract liabilities; and competency of the buyer as well as post purchase competence in technical, operational, and financial issues.
In May, Shell’s Chief Executive Officer, Ben van Beurden, while speaking at the company’s annual general meeting, said that Shell could no longer afford to be exposed to the risk of theft and sabotage.
But for ConocoPhillips, it is the second sizable acquisition in a year in the heart of the U.S. shale industry, as American and European producers diverge in whether to focus on hydrocarbons going forward.
Like all of the world’s largest oil companies, Shell is under pressure from investors to reduce fossil-fuel investments to help reduce global carbon emissions and fight climate change.
Shell and BP Plc have set targets to slowly move away from crude production while investing in non-fossil energy sources like solar and wind power, while U.S. producers including Exxon Mobil and Chevron are doubling down on hydrocarbons.
Through the deal, ConocoPhillips sides with the latter, but concurrently announced it would tighten its targets for cutting greenhouse gas emissions, an acknowledgement of heightened focus on climate considerations.
ConocoPhillips is acquiring around 225,000 net acres, as well as over 600 miles of associated infrastructure, according to its statement announcing the transaction. This builds on its existing portfolio of 750,000 net acres in the Permian.
U.S. shale producers have used mergers and acquisitions to boost their size to compete against the largest operators and lower production costs through economies of scale.
To help pay for the deal, ConocoPhillips will hike its own divestment targets by 2023 to between $4 billion and $5 billion, up from between $2 billion and $3 billion.
For Shell, selling the Permian assets will leave its U.S. oil and gas production almost entirely in the offshore Gulf of Mexico, where it is the largest single producer. It sold its Appalachian gas assets last year.
Shell will return $7 billion of the proceeds to shareholders as dividends on top of existing commitments, with the rest going to pay down debt, it said. Conoco also announced it would increase quarterly cash payments to shareholders by 7 per cent from December 1, according to a Reuters report.
MFS Africa Acquires Baxi, Expand Operations Into Africa’s Largest Economy
MFS Africa, the largest pan-African digital payments hub, announced it had signed an agreement to acquire Baxi, one of Nigeria’s largest independent SME-focused electronic payment networks. The deal, which is subject to approval from the Central Bank of Nigeria, will be the second-highest fintech acquisition in Nigeria to date.
Nigeria, Africa’s largest economy is the largest remittance market in Africa with one-third of intra-Africa remittance flows. MFS Africa’s presence in Nigeria to date has been limited given the country’s small number of mobile wallets. With the acquisition of Baxi, MFS Africa will expand its pan-African network into Nigeria, connecting Nigerian businesses to the continent and the rest of the world.
According to MFS Africa Founder and CEO Dare Okoudjou, he said, “this deal is a pivotal step in our journey. By combining Baxi’s network of SMEs operating as agents with our pan-African network, we aim to take Nigeria’s SMEs to the rest of Africa and the world. Our expansion into Nigeria brings us one step closer in our mission of making borders matter less,”
Baxi was founded in 2014 by Degbola Abudu and Folu Majekodunmi, the electronic payment network provides a cash-in/cash-out offering as well as value-added services — account opening, money transfer, bill payment and more — to the last mile. Through its network of more than 90,000 agents, Baxi has already processed over USD 1 Billion in transactions this year.
Following the acquisition’s close, MFS Africa will build Baxi into a key node on its digital payment network, allowing customers to make regional and global payments to and from Nigeria. MFS Africa will also expand Baxi’s proposition for offline SMEs to select markets within MFS Africa’s footprint of 320 million mobile wallets across more than 35 African countries.
Previous restrictions to mobile network operators’ participation in mobile money services have restrained the sector’s growth in Nigeria. To serve the more than 55% of Nigerian consumers currently excluded from formal financial services, Nigerian fintechs that have built strong agent networks are the crucial interface to reach Nigeria’s ~31m financially underserved and ~67m financially unserved populations. Supporting and nurturing SMEs is crucial to Nigeria’s economy, as they contribute 50% of Gross Domestic Product and provide 76% of jobs. With its presence in 36 Nigerian states, Baxi fills a critical gap by providing unbanked Nigerians and informal SMEs access to financial services.
The focus areas of both companies are complementary. Baxi simplifies and integrates online and offline payments for SMEs and merchants in Nigeria through its omnichannel distribution network. MFS Africa simplifies cross-border payments, integrating payments via one hub.
“We’re thrilled to partner with the MFS Africa team to expand our service offering for individuals and SMEs. We believe that we’ve barely scratched the market’s potential. Only 3% of Nigerian SMEs have access to credit products. By teaming up with MFS Africa, and with the strong support of our local commercial banking partners, we can offer more value-added products and services, such as cross-border payments, to support Nigerian SMEs in their growth,” said Degbola Abudu, Baxi CEO.
Baxi acquisition is MFS Africa’s third acquisition in five years, seeing the pan-African payments giant expand into Africa’s largest economy, where its presence to date has been limited given the country’s small number of mobile wallets. Capricorn will be called MFS Africa but its core product, Baxi, retains its name.
Both parties declined to disclose the value of the deal, however, Capricorn Founder and CEO, Degbola Abudu, in a call with TechCabal said the deal is the second-largest of its kind in Nigeria’s fintech space, behind the $200 million Stripe paid for Paystack last year.
MFS Africa was founded in 2009 by Dare Okoudjou, a Beninese national, while Nigeria-born Abudu started Capricorn in 2014, with Folu Majekodunmi. The acquisition creates a larger, more versatile company that fuses interoperability between money operators and a super-agent network reaching the mass market.
MFS Africa’s big vision is to have a presence in all 54 African countries, serving 500 million people and millions of small businesses, according to Okoudjou. He said, “if you have a phone or POS, it should be enough to transact with the rest of Africa and the world, we’re building the foremost, currency-agnostic, real-time hub for payments on the continent, to enable people to transfer money the way they can call each other.”
Often, MFS Africa’s continental expansion plan has involved partnering with money operators and making minority investments in other fintech companies across Africa, as in the case of Julaya, Maviance, and Numida.
However, Okoudjou explains that the company opts for full acquisition when both parties consider that a more effective way to achieve their shared long-term ambitions.
“The more we spoke with Dee, the more we realised what we could achieve with a full acquisition instead of being only investors in which case there could be misaligned incentives.”
Okoudjou further explains that the need to “bolster our presence in Nigeria” given its unique market features—the prevalence of offline payment touchpoints over mobile-first transactions—drove MFS Africa’s interest in Capricorn.
“In other markets, one or two partnerships with mobile money operators could see us reach 60% of digital payment users in the country. However, mobile money isn’t that widely adopted in Nigeria. Instead, agent networks such as Capricorn’s have grown rapidly.” He says.
For Abudu, the future of the mobile payments landscape in Africa is a game of few, where consolidation is the way forward, and attempting to scale alone would require more capital expenditure and a longer time to execute.
“It’s a good time to partner with a company that brings a real pan-African presence and we see synergies across our operations. They offer a wide range of value-added products and services like cross-border payments while we have access to SMEs in Nigeria, one of the biggest markets in Africa. We believe that we’ve barely scratched the market’s potential. The deal brings many things that allow us to grow very quickly.
“We’ve been able to build a large business with relatively small capital but now we want to be able to compete, not just in Nigeria but also across Africa, the deal with MFS Africa gives us leverage to take Baxi and the model that’s been so successful in Nigeria to other African countries.” Says Abudu
MFS Africa plans to engage with Nigeria’s central bank and other regulators to seek any other additional licenses needed to operate its full-service offerings—such as remittance, micro-lending, insurance—while also exploring commercial partnerships in the country.
Nigerian Retail-Tech Startup Alerzo Acquires Shago Payments To Boost Growth
Alerzo, a Nigerian retail-tech startup has acquired fintech company Shago Payments to boost growth. The acquisition of Shago payments will enable the integration of Shago into the company’s payments arm, AlerzoPay.
The new development will provide the informal retail stores access to new digital services such as mobile airtime top-up, bill payments and peer-to-peer transfers.
Founded in 2019, the Ibadan-based retail-tech startup, Alerzo, is an all-in-one technology and services platform that transforms how Nigeria’s informal retail stores operate. Retailers can order stock, have it delivered quickly, receive and make cashless payments, and track store profitability. Alerzo currently works with more than 150,000 informal retail stores.
The startup announced a US$10.5 million Series A round, led by London-based Nosara Capital, in August, and since then has more than doubled its revenues and built a payments business. The latter was facilitated by the recent acquisition of Shago Payments, a fintech startup founded by payments industry veteran Sabastine Enechi.
Alerzo has also expanded its operations to the Middle Belt and Northern regions of Nigeria and now operates in Abuja and Kano. The company plans to serve most of Nigeria before the end of next year.
Alerzo Founded by Adewale Opaleye, said he created the company to meet a core need that his mother, a businesswoman, had at the time.
“I started Alerzo to help my mom, a single mother who ran two informal retail stores to support me and my three siblings. Before Alerzo, she had to close her shop and travel for hours to buy the inventory to stay in business.
“Women are often victims of theft because street boys know retail store operators often carry cash. I wanted to apply what I learned in China to make life better for working mothers in Nigeria.” He said.
Today, Alezo one of the fastest-growing startups in Nigeria, announced that its annualized September transaction volume had grown more than five times since the beginning of 2021, exceeding $155 million.
Commenting on the acquisition, Iyinoluwa Aboyeji, the co-founder of Flutterwave and Andela and a member of Alerzo’s advisory board, said that the firm’s decision to serve communities “that are truly excluded” was inspiring: “Alerzo’s focus on excluded but commercially viable commerce communities in smaller cities like Ibadan is exemplary and visionary.”
He also said most businesses “talk a good game” about financial and economic inclusion but then proceed to focus their businesses on commercially savvy megacities like Lagos or Nairobi.
Sub Saharan Africa Mergers and Acquisition Transactions Totalled US$ 78.3 Billion During First Nine Months of 2021
Refinitiv today released the Sub-Saharan African investment banking analysis for the first nine months of 2021. According to the report, an estimated US$387.5 million worth of investment banking fees were generated in Sub-Saharan Africa during the first nine months of 2021, a 15% increase from the same period in 2020.
While debt capital markets underwriting fees increased 148% to US$117.8 million, the highest year-to-date period since our records began in 2000, fees from equity capital markets underwriting, M&A advisory and syndicated lending all declined from the first nine months of 2020. Equity fees declined 17% to US$50.7 million, while syndicated lending fees declined 4% to US$148.2 million. Advisory fees earned in the region from completed M&A transactions reached US$70.8 million, down 3% from last year to the lowest first nine-month total since 2013. Fifty-eight percent of all Sub-Saharan African fees were generated in South Africa during the first nine months of 2021, and 23% were earned from deals in the financial sector. Standard Chartered earned the most investment banking fees in the region during the first nine months of 2021, a total of US$33.1 million or an 8.5% share of the total fee pool.
MERGERS & ACQUISITIONS
Boosted by the US$44.1 billion Naspers/Prosus share swap in May, the value of announced M&A transactions with any Sub-Saharan African involvement reached US$78.3 billion during the first nine months of 2021, more than four-times the value recorded during the same period last year and the highest first nine-month total since our records began in 1980. The number of deals increased 4% from last year to a three-year high of 584.
M&A involving a Sub-Saharan African target reached US$61.8 billion, again lifted by the share swap to an all-time record first nine-month total, while the number of deals increased 8% over last year. Inbound deals, involving an acquiror outside of Sub-Saharan Africa, increased 86% to US$9.6 billion, while Sub-Saharan African outbound M&A more than doubled to US$11.5 billion. With advisory work on deals worth a combined U$52.1 billion, Morgan Stanley held the top spot in the financial advisor ranking for deals with any Sub-Saharan African involvement during the first nine months of 2021.
EQUITY CAPITAL MARKETS
Sub-Saharan African equity and equity-related issuance reached US$971.2 million during the third quarter of 2021, the highest quarterly total in more than two years. Despite the strong third quarter, total proceeds raised during the first nine months of 2021 was down 42% from last year at US$1.2 billion, the lowest first nine-month total since 2005. Pepkor Holdings, Lighthouse Capital and retail pharmacy chain Dis-Chem Pharmacies were among those in the region raising new equity funds from follow-on offerings during the third quarter. There have been no initial public offerings in the region so far during 2021. Investec and Goldman Sachs share first place in the Sub-Saharan African ECM underwriting league table during the first nine months of 2021.
DEBT CAPITAL MARKETS
Sub-Saharan African debt issuance totalled US$37.2 billion during the first nine months of 2021, up 149% from the value recorded during the same period in 2020 and the highest first nine-month total since our records began in 1980. The number of issues increased 33% over the same period. US$15.2 billion worth of the bond proceeds were raised during the third quarter alone, with both Prosus and the Federal Government of Nigeria raising US$4.0 billion. Government & Agency issuance accounted for 55% of proceeds raised during the first nine months of 2021, while the financial sector accounted for 24%. Citi took the top spot in the Sub-Saharan African bond book runner ranking during the first nine months of 2021, with US$6.0 billion of related proceeds, or a 16% market share.
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