Monday, March 27, 2006

Takeover Offer Circular of Total Outre Mer Mobil Ghana Shareholders - A Commentary


We wish to comment on the Offer Circular, which has been forwarded to shareholders of Mobil Oil Ghana Limited (hereinafter referred to as ‘Mobil’). We do so in our capacity as stakeholders in the development of a sound securities industry in Ghana.

We are hopeful that our comments will help in building a viable securities regulatory regime for the capital market in Ghana and also encourage more discussion and dialogue on the future direction of regulation in the securities industry in Ghana.

Page 2, paragraph 3

We notice that no reference is made in the entire Offer Circular about the role of the Board of Directors of Mobil. We recognize that the Ghana Stock Exchange Takeovers and Mergers Rules (hereinafter referred to as the ‘Takeover Rules’), particularly rule 2, assigns a role to the Board of the Offeree in these processes.

We therefore recommend that in future mergers and acquisitions, the role of the Offeree Board be set out clearly. It may be possible for separate communication to be forwarded from the Mobil Board to their shareholders. In an acquisition such as under review, which is not hostile and which essentially is being carried out by the same corporate entity, it would have been fair to denote what the Offeree’s Board will have to do, especially when the applicable rules indicate some actions that ought to be taken by the Offeree Board. This will also help in strengthening the capacities of such Boards, as they will be compelled to abide by relevant corporate governance principles.

Corporate Information/Total Outré Mer’s Advisers, page 5

The Offer Circular seems to reflect the contact persons for both the Offeror and the Offeree as being the same. Though the disclosure is adequate and commendable, it may raise some doubts in the minds of some investors. If the same individual is representing both the Offeror and the Offeree, it is our respectful submission that the Board of Mobil should have been able to make a determination on the fairness or reasonableness of the price to the shareholders. This could be done in separate and additional communication to the shareholders.

Part 1 – The Offer, page 9

ThinkGhana finds the level of disclosures in the Offer Circular as commendable, particularly compared to the previous major acquisition on the stock market involving Guinness Ghana Limited’s takeover of Ghana Breweries Limited. Disclosure is critical to informed investment decisions. We therefore take the opportunity to commend the regulators in this particular instance and to recommend strongly that all Offer Circulars be made to contain relevant material information to enable shareholders make informed investment decisions. We find the disclosure that the agreement forms part of a transaction involving acquisition of fuels and lubricants businesses in 14 African countries as particularly illuminating.

We however draw attention once again to the acute dearth of information on what corporate actions the Board of Mobil will take. The Takeover Rules place an obligation on the Offeror to place the Offer in the first place with the Board of Mobil. What did they do after receiving it? What are they doing presently and what can they tell their shareholders? It cannot be said that in this particular transaction, the Board of Mobil is not involved in the process, with particular regard to the disclosed antecedents to the deal. We will therefore reiterate that Offeree Boards be encouraged to either communicate to shareholders on such Offers in separate communication where it is not feasible to include such communication in the Offer Circular which technically emanates from the Offeror.

Basis of Pricing the Offer, page 9

ThinkGhana acknowledges that the offer price of ¢54,000 per share more than meets the Ghana Stock Exchange requirements. This is also a major cause for optimism as it contrasts sharply with the situation in the GBL acquisition when the Offer Circular claimed that the original offer price of ¢1425 to shareholders of GBL offered an opportunity to make capital gains as it was higher than the stipulated minimum of the 26 week average. This statement was put in the Circular even though GBL’s prevailing price at the material time the statement was made was higher than the offer price.

Legal Basis, Regulatory Approvals and Waivers, page 10

ThinkGhana finds the disclosures in this section also commendable and worthy of emulation in subsequent acquisitions. We draw attention particularly to Total Outré Mer’s disclosure that it intends to merge with Mobil in 18 months. This is a fundamentally important disclosure which brings into sharp focus the continuing unfortunate situation on the market in the wake of the Guinness deal where there has been a consistent, deliberate effort to miscommunicate the distinctions between takeovers and mergers. In the Guinness scenario, a merger was promised but has clearly not been delivered yet Guinness has consistently put out communication to the effect that it has merged with GBL. This misinformation, regrettably, has also been adopted and repeated by the SEC itself. ThinkGhana believes that the SEC has the capacity to enforce the securities laws and must therefore be seen to be doing that. Confidence is the glue that holds markets together. To the extent that confidence is gnawed at, markets become unstuck, and this negatively affects all stakeholders.

We also note that no reference is made to any specific section of the Takeover Rules as being applicable. It will be recalled that ThinkGhana has had occasion to caution against acquisitions being done pursuant to rule 1(4) for example, as was the case in the Guinness deal. The legal implications of stating that an acquisition was being done pursuant to rule 1(4) have already been communicated to the SEC. We draw attention particularly to rule 2(4) and to the appendix to the rules, particularly clause 6 on rules 2(8) and (9). The Appendix to the Takeover Rules as it stands, states that if the Offer is approved by the Board of the Offeree (i.e. Mobil), then the Offer is done through the Mobil Board. If not, it is done directly to the shareholders. This seems to suggest that the Mobil Board did not approve the Offer when a close reading of the Circular clearly shows that this is not a hostile takeover. In view of the ‘loud silence’ of the Mobil Board on all these issues, shareholders, as rightly indicated in the Circular, would have to consult their own investment advisers on the way forward without the added benefit of the Board’s opinion.

ThinkGhana wishes to recommend that in future, statements sent to the Board of the Offeree and approved by the Board in accordance with the Takeover Rules should be included in the Circular or the Offeree Board should forward separate and additional communication to its shareholders. We believe that this would enhance corporate governance principles in Ghana, as the Offeree Board would be compelled to undertake its own due diligence.

Part III, Reasons for the Offer

As earlier indicated, we find the disclosures in this section very commendable and a major improvement on disclosure standards regarding such transactions on the market.


ThinkGhana finds the Offer Circular a major improvement on disclosures and compliance with basic securities laws and regulations compared to the previous takeover activity on the stock market. ThinkGhana has had occasion to point out to the SEC that there would be a lot more mergers and acquisitions on the stock market and the regulator needs to improve its internal systems to handle them when they arise. We therefore call on the SEC to expedite the promulgation of the Draft Takeovers and Mergers Regulations to provide clarity on the market concerning acquisitions activity in Ghana. As the SEC is clearly aware, the Takeover Rules of the GSE are clearly deficient and also has no provisions in respect of mergers. By definition, it will only apply to listed companies. The SEC’s Rules will apply industry-wide. All efforts should therefore be made to ensure the passage of clear rules for the entire industry without further delay.

The SEC should also be mindful of the commitments made in the Circular regarding the intended merger with Mobil such that the situation does not degenerate as has been allowed to happen in the case of the Guinness acquisition of Ghana Breweries Limited where there has not been a merger but the entire nation has been made to believe that there has been a merger.

Yours in the service of Ghana

Accra, Ghana


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