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Union Bank group invests N47.1bn in Afribank offer


December 10, 2007/BusinessDay


The Union Bank Group may have passed a vote of confidence in Afribank with the level of its buy-in in the current public offering of the bank. The group which was represented by Union Bank of Nigeria Plc and Union Capital Markets Limited offered to bankroll 47.1 per cent of the total deal.


This indicates that the Union Bank Group had earmarked about N47.1billion as investment in the Offering. Prospectus to the Public Offering stated clearly that the arrangement was irrevocable ‘Firm Basis’.



It would be recalled that Afribank Bank Plc currently under the tutelage of Sebastian Adigwe is on the prowl on the Stock Exchange to raise a gross proceeds of N100billion by issuing 4.0billion units Ordinary shares of 50kobo at N25 per share.


The Bank has estimated net offer proceeds of N94.12billion less N5.88billion, being estimated cost of raising the fund.


Union Bank of Nigeria Plc and Union Capital Markets Limited undertook to provide a cover on 1,884,000,000 units of the total volume of shares being offered for sale by Afribank. The figure represents 58.88 per cent of the mandatory 3,200,000,000 Ordinary shares that must be underwritten by joint issuing houses to the offer. In all, 13 issuing houses agreed to bet their monies on the Afribank Offer, which analysts said, depicts a show of confidence in the bank.


11 other Issuing Houses which include IBTC Chartered Bank Plc, FBN Capital Limited, Greenwich Trust Limited, Lead Capital Limited and Profund Securities Limited offered to pay N32.9billion for 1,316,000,000 of the bank’s shares on a ‘firm basis’. Others in the deal include Falcon Securities Limited, Fidelity Finance Company Limited, FSDH Securities Limited, Northbridge investment & Trust Limited, Spring Capital Markets Limited and Tiddo Securities Limited. In all, these 11 other issuing houses offered to underwrite 41.12 per cent of the 80 per cent mandatory minimum.


Meanwhile capital market analysts have described the backing of Union Bank Plc for a rival bank like Afribank Plc as ‘utmost show of confidence and an open invitation to the investment public to patronize in the deal’.


Equity investment

If the offer succeeds, Afribank would have succeeded in increasing its capital base to about N124.89billion from N30.77 billion as at March 31, 2007. This no doubt is expected to give reasonable boost to the bank’s ability to fund larger ticket transactions which will impact positively on its bottom line. Available facts show that the bank is at present making a good use of the equity contribution from its various shareholders. Return on Equity (ROE), which is an indicator which measures this factor indicates that the bank’s performance at present is above industry average 14.5 percent.


It recorded 16.25 percent in March 31, 2007 compared to 14.5 percent which was industry average as the first week in October.


ROE in March 2006 was 9.02 percent in Afribank. However, there are indications that the bank may not have been fully able to deploy its assets to create wealth to the industry’s standard for its shareholders. Though Return on Assets (ROA) in 2007 recorded a growth of 0.77 basis points over 1.9 percent of the same period in 2006, it still fell below the industry’s average figure of 2.93 percent in October 2007. It is however interesting to note that the bank has, in the last one year, improved on its investment ratios. We are optimistic that the bank can sustain the trend over a reasonable period of years, if the not derailed.

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