THE NATION MONDAY, OCTOBER 3, 2011
14
ISSUES
•GMD Oceanic Bank, John Aboh
•GMD FinBank, Suzzane Iroche
•GMD Intercontinental Bank, Lai Alabi
•GMD Union Bank, Funke Osibodu
Rescued banks have more hurdles to clear • Continued from page 13
September 30 deadline set for them. It therefore handed them to the Nigeria Deposit Insurance Corporation (NDIC). The Corporation subsequently transferred the assets and liabilities of the banks to newly incorporated Bridge Banks, namely Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited. The assets and liabilities of the banks were sold to the Asset Management Corporation of Nigeria (AMCON), which subsequently injected N679 billion into the banks to keep them running. By the nationalisation, shareholders of the three banks had lost an estimated billion of naira. Between September 26 and 30, when the rescued banks’ recapitalisation bids were tabled before shareholders at the EGMs for approval, a coalition of 25 registered shareholders associations expressed their willingness to endorse the lenders’ deals.
The Extra-Ordinary General Meetings
Shareholders of Oceanic Bank International, on September 27, overwhelmingly approved the planned merger with Ecobank Transnational Incorporated (ETI). At a courtordered meeting, the shareholders consented to the proposal brought before them by the board of Oceanic Bank. “Shareholders at the meeting gave their overwhelming support for the board and management to go ahead with the merger deal,” Group Managing Director, Oceanic Bank, John Aboh, said. He said both banks are coming together to form a solid larger bank that will deliver better returns for shareholders. He said the reform process has taught shareholders and stakeholders that communication is very essential in everything, adding that contrary to projections that share exchange ratio between ETI and Oceanic was 20 for one, it was actually 14 for one. Aboh disclosed that ETI paid N1.12 for each unit of Oceanic share. “People thought that share exchange ratio was 20 for one, but it is actually 14 for one. And also, if you look at the price of Oceanic, which was suspended at N1.15 and Ecobank Transnational Incorporated is actually paying about N1.12,” Aboh said. He said the combined entity is coming back together, not as an asset striping corporation, but with the commitment to do business and create value for shareholders. “It is the beginning of a new day for Oceanic Bank. It is the beginning of a new day for the combined entity.”
Sterling Bank/ETB EGMs
Likewise, shareholders of Sterling Bank Plc and Equitorial Trust Bank (ETB) Limited also approved the merger of the two banks with shareholders describing the merger as a fair deal. At their separate EGM in Lagos, shareholders overwhelmingly voted for the merger, citing opportunity for better returns and strengths of the two banks as part of the reasons for their consent.
With the shareholders’ approval of the scheme of merger, Sterling Bank would issue two ordinary shares of 50 kobo each in exchange for one ordinary share of N1 each of ETB. This implies an exchange ratio of two shares for two shares exchange ratio where ETB’s share is subdivided into 50 kobo nominal value. With the merger, shareholders of ETB including AMCON would assume 20 per cent stake in Sterling Bank Plc, consisting of 10 per cent equity stake each for existing shareholders of ETB and AMCON. ETB would also nominate a director unto the board of Sterling Bank. Speaking at the EGM, chairman, Sterling Bank, Dr. Suleiman Adegunwa, said with the common values of both banks and other numerous synergies, the merger would maximise values for the customers and shareholders of both banks. According to him, the merger would further strengthen Sterling Bank into a formidable financial institution wider branch network and strong retail franchise. “We also envisage that the emergent Sterling Bank from the merger would be a market leader in service delivery in all locations with branches well situated in metropolitan centres in Nigeria with attractive demographic characteristics,” Adegunwa said. Addressing shareholders on the benefits of the merger, Group Managing Director, Sterling Bank Plc, Mr Yemi Adeola, said the bank expects to increase its earnings, reduce costs and leverage on the synergies from the two banks to consolidate its market share. “With this merger, we are laying the foundation for future earnings growth and better financial performance. We expect to increase earnings, cut costs and significantly build shareholder value,” Adeola said.
ETI shareholders also met
Equally, shareholders of Ecobank Transnational Incorporated (ETI) also unanimously approved the bank’s resolution to acquire Oceanic Bank Plc as part of strategic transactions for which the bank is raising $3 billion. The board assured shareholders that Oceanic Bank has been rid of bad debt by the AMCON. The board also insisted that Oceanic remained strong in assets with wide spread network. Approving the resolution in an EGM in Lagos, overwhelming 93.332 per cent of shareholders voted in favour as against 6.667 per cent that opposed the resolution, while 0.001 was void. Shareholders of Oceanic had a day before, overwhelmingly approved the transaction.
With shareholders of both banks giving their nod to the acquisition, the coast is now clear for 100 per cent acquisition of Oceanic Bank by ETI. Addressing shareholders at the meeting, ETI Board Chairman, Mr Kolapo Lawson to said that the approval would enable the bank pursue its expansion agenda in Africa, particularly Nigeria and Ghana. Expressing his satisfaction at shareholders’ approval, the chairman said: “The general meeting approved the resolution reaffirming the authorisation earlier granted to the board in 2008 to raise up to $3 billion in equity, debt, quasi equity global depository receipts (GDR) or a combination of any or all of these as the board of directors may deem appropriate.”
Union Bank shareholders approve recapitalisation
Shareholders of Union Bank at the weekend, voted in support of the lender’s scheme of arrangement, paving way for the 94-yearold institution to progress with its recapitalisation plan. At the Court Ordered Meeting held in Abuja, 2955 shareholders translating to a total number of 2,174,349,978 shares voted in favour of the scheme. This represents 99.9 per cent of the value of shares of shareholders present at the meeting. Only 189,000 shares voted against the scheme, representing 0.01 per cent of value of shares of shareholders present. Earlier, the shareholders called on every stakeholder to take up their Rights Issue in full so as to preserve their capital value in the bank. They also commended the board of directors, management and staff of the bank for their efforts and understanding in ensuring that the recapitalisation process is realised. Upon the scheme coming into effect, existing shareholders would retain 2, 533,125,000 ordinary shares in the recapitalised Union Bank. They would receive three new Union Bank shares in exchange for 16 currently held. It is expected that post-recapitalisation, the value of the recapitalised Union Bank would rise, thereby enhancing shareholder value. The banks has projected profit after tax of N9.2 billion, N17.2 billion and N19,4 billion for the years ended December 31, 2002; 2013 and 2014. In view of the forecast, the effect of the scheme on the returns of existing shareholders would be accretive in the medium to long-term.
How the mergers, acquisitions will unfold Oceanic Bank is seeking business combination
‘However, bigger banks may gain access to cost-saving technologies or spread their fixed costs over a larger base, thus reducing average costs. Efficiency gains may also result from economies of scope, as the deal may allow the merging parties to enter new markets and cross-sell their products to a wider customer base.’
with Ecobank Transnational Incorporated; Intercontinental Bank has opted to combine with Access Bank; Finbank has chosen First City Monument Bank (FCMB); Equitorial Trust Bank has signed on to Sterling Bank while Union Bank has chosen the African Capital Alliance (ACA) as new core investors. Also, new core investors are expected to capitalise the rescued banks above the minimum capital adequacy level. For instance, the ACA is expected to inject $500 million equity funds and $250 million Tier II capital into Union Bank while FCMB has guaranteed N15 billion to ensure Finbank meets 15 per cent capital adequacy ratio.
The AMCON Example
In what appeared to be a definitive stand on immediate action on any failed business combination, AMCON CEO, Mustafa Chike-Obi said the Corporation put N2.1 trillion down to fully recapitalise and take full control of the five banks in case shareholders vote against the business combinations. Besides, AMCON also increased the shelf value of its bond to N4.5 trillion to provide headroom for additional capital that might be needed should the shareholders fail to play ball. Chike-Obi noted that though financial services authorities have no premeditation of any failure, they would act in any failure to protect the interests of depositors and guaranteeing continuing operations of the banks, employees’ jobs and customer relationships.
Shareholders, stakeholders perspectives
The Co-ordinator of the Coalition, Olufemi Timothy, said recapitalising the banks will enable them to recoup their investments instead of losing everything. “We appeal to both the Federal Government, the Central Bank of Nigeria (CBN) and other regulators, not to nationalise our banks again. We are in support of all the Transaction Implementation Agreements (TIA) signed by the five recued banks,” he said. Assessing the CBN reforms so far, Renaissance Capital, an investment and research firm, said the global financial crises of 2008 and 2009 altered the equation of the country’s banking industry. “The big Nigerian banks have remained big and some of the previously mid-tosmall-scale banks have leapt into the big banks’ league, creating more top-level concentration. Going forward, we believe size, liquidity, capital and efficiency will define the champions in the emerging banking landscape and the healthy banks will have first mover advantage,” Renaissance said in an emailed statement. The projection is that in total, the number of Nigerian banks will reduce by four to 20, with the tier -one controlling 65 per cent and 66 per cent of assets and deposits the tiertwo controlling 25 per cent and 23 per cent of assets and deposits; and the tier-three controlling 10 per cent and 11 per cent of assets and deposits.