CBN begins due diligence on Union, Afribank, Oceanic, others
Category: Investors NewsBeat
Banks being prepared for acquisitions The Central Bank of Nigeria (CBN) has entered the final stage in its preparation to get the seven troubled banks it took over between August and October this year ready for sale to interested parties, BusinessDay has learnt.
It is now carrying out due diligence on the banks that it had injected some N600 billion capital and sacked their executive managements in the process. Indeed, the recently appointed nine additional advisers for the banks are presently helping to accelerate the due diligence which would lead to possible acquisition process of the banks, BusinessDay investigations showed at the weekend.
Days after the CBN intervened in five banks on August 14, namely Oceanic, Afribank, Union, FinBank, and Intercontinental, KPMG, the chartered accounting and financial services firm, had been working on the books of the banks. KPMG also started work on Bank PHB and Spring Bank after the apex bank intervened in the institutions later on October 4.
At the same time, Deustche Bank and Stanbic IBTC have been advising the CBN from the onset of the intervention. Since then, a source said their work has covered audit, forensic audit, and now due diligence is being carried out in all the banks in preparation for some form of mergers and acquisitions. In the last few weeks, some of the due diligence has intensified such that data room information are now being collated in some of the banks.
It thus means that a large amount of confidential information and data is being collated for the purpose of making same available to the other banks that may be interested in acquiring the bailed out banks. Under normal mergers and acquisitions transactions, the data room is opened to potential bidders. In this case, it appears the CBN is carrying out the due diligence for it’s and third party banks’ purposes, as well as for stability in the financial system.
For the banks, few possibilities remain, the source said. The possibilities have been reduced to mergers and acquisitions, as the CBN sees a 15 bank structure by the end of first quarter of 2010. “It is difficult for foreign banks to come in wholesale, so the attraction for them will be a tie up or taking up a stake in the existing banks,” said one analyst who chose not to be named. It thus leaves Nigerian banks in best position to acquire the banks.
A BusinessDay source said that banks such as Access, First Bank, UBA, Fidelity and Skye Bank are all poised for acquisition of any of the CBN capital injected banks. When the banks are acquired, it is expected that they will be “cherry picked”. The “good” assets of the banks will be acquired by the banks, while the CBN will be left with the bad assets, following similar circumstances during the consolidation period in 2005. Thus, the CBN will absorb the toxic assets of the banks while the acquiring banks will take on the acquired banks’ deposits and their other liabilities.
Early this month, the CBN mentioned that it will set up the Asset Management Company (AMC) with a N250 billion capital, some of it coming from the treasury. It is expected that the AMC will acquire and warehouse the toxic assets of the CBN capital injected banks to allow for completion of the merger process without the toxic assets blocking the way.