Five weeks after the management of the Union Bank of Nigeria Plc proposed to open its rights issue for N9.5 billion, indications have emerged that unless something gives soon, the waiting game might linger for some time.
A source close to the bank on Wednesday blamed the delay on the decision of the Securities and Exchange Commission (SEC) to thoroughly evaluate the documents submitted before giving its nod in line with good corporate governance.
But another source close to SEC told Daily Independent that the delay “has to do with questions as to how proceeds of the bank’s last public offer was utilised.”
The offer in question was undertaken in 2006 when the Godwin Oboh-led management sought to raise N40 billion by way of offer for subscription to the public and a rights issue that was over-subscribed, yielding N55.1 billion.
According to the offer prospectus, Union Bank sought to invest N14.68 billion or 38.8 per cent of the offer proceeds on working capital (including capacity building) while earmarking N11.11 billion or 29.36 per cent for information technology upgrade within 24 months.
On the international front, the board proposed an N8 billion or 21.14 per cent investment in Union Bank (UK) Plc, its off-shore subsidiary, and another N3.17 billion or 8.38 per cent in the then ongoing banking consolidation, wherein it acquired four small-sized competitors – Union Merchant Bank (its subsidiary), Broad Bank, Hallmark Bank and Universal Trust Bank.
The remaining N880 million was to be ploughed into opening 23 new branches across the country.
Speaking on Monday evening, the SEC source explained that the offer might take longer in opening “unless issues relating to the 2006 offer are resolved, except otherwise by a miracle.”
Management of the Union Bank told reporters early October that the N9.5 billion rights issue was part of plans to enable them raise their stake in the bank, following injection of fresh capital by the Asset Management Corporation of Nigeria (AMCON), which raised the capital base from negative to zero, following which Union Global Partners Limited, the new core investors, invested $500 million in Tier 1 capital.
According to Philip Ikeazor, the bank’s Executive Director, Corporate, International and Investment Banking and Treasury, the rights issue would ensure that existing shareholders raise their stake in the re-energised Union Bank to 21 per cent.
This will bring AMCON’s stake to 19 per cent, leaving the new core investors with 60 per cent.
The bank urged existing shareholders to take up their rates, failing which their stake would drop significantly to 15 per cent.
According to the rights circular, shareholders would receive five new shares for every nine reconstructed shares held, at N6.81 per share, same as the price paid per share by African Capital Alliance.
For Ikeazor, “shareholders had unanimously voted in favour of all the options and plans of the recapitalisation process as recommended by the Board of Directors, and we received the consent of all parties involved to float a Rights Issue of 1.407 billion ordinary shares at a price of N6.81 per share.
“Since there had been a lot of clamour from our shareholders to be given the opportunity to be a part of the recapitalisation process, we decided to float the Rights Issue, as it would offer the existing shareholders an opportunity to participate in the recapitalisation and also increase their stake in the bank,” he said.