September 22, 2011
September 22, 2011
Ahead of the Court Ordered Extra Ordinary General Meeting (EGM) slated next week for the proposed banks’ merger, there have been concerns among stakeholders in the industry as per the benefits to shareholders and the economy in general. The ongoing Nigerian banking industry reform necessitated for the banks’ merger as a means of meeting the minimum N25 billion capital base required by the apex regulator, Central Bank of Nigeria (CBN).
Nigerian banking reform is a product of the global efforts at revamping the world economy. For a long time in the history of policy reforms in Nigeria, developing the banking sector was given priority attention. Various directives were given to the banking sector with the aim of developing other sectors; thus propelling the entire economy. The directive of raising the minimum capital for each bank to twenty five billion naira (N25 billion) was mostly achieved through banks consolidation by the instrumentality of Mergers and Acquisition (M&A).Implicit in the capitalization directive is the belief that stronger banks would act as spring board for the growth and development of the other sectors of the economy especially cottageindustries and other Small and Medium Scale Enterprises (SMSE).
A review of the past merger after consolidation had shown that the banks have not done much to move the economy to the desired level.
Meanwhile, the current CBN Governor, Mallam Lamido Sanusi had said that 10 banks’ merger may likely emerge by the end of 2011. At moment about eight banks are already in the process of commencing their merger plans, to start with a court ordered EGM. These are : Access Bank versus Intercontinental Bank; Ecobank versus Oceanic Bank; FCMB versus Finbank; and ETB versus Sterling Bank.
The Managing Director of Assets Management Company of Nigeria (AMCON), Mr. Mustafa Chike-Obi, in an interaction with Vanguard partly blamed shareholders of the rescued banks for their failures.
According to him, “The shareholders ought to have corrected the abnormality that existed in the running of these banks by their directors. How can directors use depositors’ funds to buy exotic cars and provide gigantic allowances for their foreign trips? So the action taken by the CBN is a lesson to them so that in future such will not reoccur. We expect them to take opportunity provided by the merger arrangement to recapitalize the banks and put them in a good position to compete favourably in the industry.
If any of the shareholders object to the merger arrangement, then AMCON will commit additional N1.3 trillion to make it a total of N2 trillion that would have been injected into the rescued banks.” The implication is that any of those banks might be nationalized as was the case with the recently three bridge banks.
Meanwhile, some of the shareholders in their responses revealed that they will show their support to the merger. Speaking on Access and Intercontinental Bank proposed merger, the President of Nigeria Shareholders Solidarity Association, Mr. Timothy Adesiyan pointed out that the registers of both banks shows that the names of investors in the banks are almost the same. According to him, the shareholders in the bank are ready to support anything that will be done to avoid the Central Bank of Nigeria’s hammer, as was the case with the three nationalised banks. He advised investors in the banks to continue to monitor the banks’ activities after the merger to avoid being marginalized.
Also, the chairman of Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie endorsed the merger deals of the banks, noting that if the shareholders refuse to approve the merger, the CBN may nationalised the rescued bank. He said, “There is nothing we can do than to accept whatever they have planned to do. We should divest our investment to other quoted companies and stop investing in the banking sector, because even if those organisations are delisted from the Nigerian Stock Exchange, we will still not be able to recoup our money to some extent. To me, investing in banks’ stocks is just a waste of time and money.”
However, industry operators have commended the merger process as it has been transparent. The Scheme has received the necessary regulatory and judicial approvals and is now subject to approval by Access Bank and Intercontinental Bank shareholders at their respective Extra General Meetings scheduled to take place on Monday, September 26, 2011.Commenting on the transaction, the Chief Executive Officer of Access Bank, Aigboje Aig- Imoukhuede, said, “Access has critically analysed inorganic growth opportunities as they have arisen since the Central Bank of Nigeria’s special examination in2009. “We have identified Intercontinental as an entity which will significantly complement our business model and support our growth ambitions. The transaction enhances our retail banking offering and extensively increases our distribution platform through Intercontinental Bank’s impressive branch network thereby consolidating Access Bank’s position as a market leader in the Nigerian banking sector.”
The Chief Executive Officer of Intercontinental Bank, Mr. Mahmoud Alabi said, “The board of directors of Intercontinental Bank is of the belief that the transaction contemplated in the scheme will provide considerable benefits and opportunities to the shareholders, customers, staff and other stakeholders of the Bank.
“Critically, the process will ensure that the Bank meets the CBN’s 30th September recapitalization deadline, enabling shareholders to preserve some value in the Bank”The Transaction marks an exciting opportunity for the Bank and our stakeholders to become part of one of the top banking institutions in Nigeria by asset size supported by the combined strength of the banks’ strategic branch networks and banking operations.”
The merger scheme scheme show that AMCON will own 15 per cent of the merged entity, Intercontinental shareholders will own10 per cent. The dilution effect of the transaction on Access Bank shareholders will be at best situation 4 per cent and at worst case 4 per cent after the merger. –Shareholders of Nigeria’s Intercontinental Bank (Interco) will get one new share for every seven held after Access Bank injects 50 billion naira to recapitalise it.
Oceanic Bank International Plc, Finbank Plc, Union Bank of Nigeria Plc and Finbank Plc are to convene their court-ordered meetings in respect of their proposed recapitalisation transactions respectively on September 27, 2011; September 29, 2011, September 30, 2011 and September, 29 2011.
Source: Vanguard/ BY PETER EGWUATU
Source: Vanguard/ BY PETER EGWUATU