Monday, 01 August 2011 00:00 Anthony Osae-Brown & Blessing Anaro
•Acquisition may be first completed by any of the rescued banks
Barely a week after shooting to the number one position in Ghana, Ecobank Transnational Incorporated, ETI has struck a surprising all-shares-exchange deal to acquire Oceanic Bank Plc and now looks set to enter the top five bracket in the Nigeria market.
ETI is the African banking conglomerate operating via 760 branches in 32 countries including Nigeria and boasts the best network in Africa but the deal with Oceanic Bank which was announced yesterday in Lagos creates for the banking group, the scope which has always eluded it in what is easily the continent’s largest market by population.
Those close to the deal say Thursday marked the turning point in the contacts and negotiations which only climaxed just before midnight on Saturday and the transaction could see shareholders of Oceanic Bank better off by between 20-30 per cent when compared to the deal offered by First Bank earlier this year.
The swiftness of the agreement is said by analysts to reflect the hunger in both parties and their satisfaction with the terms on the table.
Both parties were saying last night that the transaction agreement they have signed will ensure that the acquisition will become the first to be completed among the banks brought under Central Bank of Nigeria (CBN) management because “both groups see value in the transaction and we have been able to carry every one along”, one source told Businessday.
Speaking at an early Sunday morning press conference to announce the deal, John Aboh, the MD/CEO of Oceanic Bank Plc said the deal will create Nigeria ’s second biggest bank by branch network. The potential bank which will see the merger of Ecobank Nigeria and Oceanic Bank will have a network of 620 branches spread across Nigeria .
However, the merger will not involve cash injection into Oceanic Bank. “This will not involve cash. The merger will be consummated through an exchange of shares. Oceanic Bank shareholders will be given shares of ETI.” Aboh explained.
Aboh further disclosed that the board of Oceanic met on Thursday and picked ETI as the preferred partner, while both banks moved to sign the Transaction Implementation Agreement (TIA) on Saturday.
“Both banks will now begin the process of seeking shareholder and regulatory approvals in accordance with the relevant laws of the Federal Republic of Nigeria, including the provision of full transaction details to shareholders at the appropriate time,” according to a statement from the bank.
Aboh also revealed that the CBN “has conveyed its “no objection” for Oceanic Bank to enter into the transaction implementation agreement with ETI.
The bank’s press release further affirms that “The board of directors of Oceanic Bank remains confident that a transaction will be completed within the required time line to comply with the Central Bank of Nigeria deadline of September 30, 2011.
“We believe shareholders will be happy with the deal. It is the best deal for both shareholders and the employees of Oceanic Bank,” said Hayford Alile, Chairman Oceanic Bank, who was also at the press conference.
BusinessDay analysis shows that based on both banks second quarter results for 2011 released last week, a merger of Ecobank Nigeria and Oceanic Bank will create a bank with total deposits of N928 billion, making it the fifth biggest bank by deposits in the Nigerian banking industry. Oceanic closed the second quarter of 2011 with a deposit base of N567 billion while Ecobank closed the same period with a deposit base of N361 billion as of June 30, 2011.
ETI six months revenues were up 24% to $506 million by June 30, 2011: Profit before tax up 30% to $134 million: Net income up 34% to $94 million: Basic earnings per share up 36% to 0.82 $ cents: Capital adequacy ratio of 19.5%
ETI has about 180,000 shareholders and its largest shareholders include IFC 11.9%, Renaissance Direct Investment Limited 9.1%.
For its part, Ecobank Nigeria closed the half year with a positive capital base of N75 billion, Oceanic closed the same period of with a negative shareholder fund of N86 billion, the lowest among the rescued banks. Also at Friday, while Oceanic price closed at N1.01 per share, Ecobank Share price closed at N2.77 per share while ETI Share price closed at N15 per share on Friday.