By Vincent Nwanma, Mar 28, 2011
Intercontinental Bank Plc surged to a two-week high after announcing a planned merger with Access Bank Plc to create the country’s fourth-biggest bank by assets.
The stock added 7 kobo, or 4.7 percent, to 1.55 naira by 10:22 a.m. in Lagos, giving it a market value of 22.2 billion naira ($187.9 million). Access was unchanged at 8.64 naira, with a market value of 154.6 billion naira. Zenith Bank Plc (ZENITHBA) is the West African nation’s biggest lender.
The merger “is a welcome development as it reduces systemic risk,” in Nigeria’s banking industry, Bismarck Rewane, chief executive officer of Lagos-based Financial Derivatives Co., a brokerage, said by phone today. “The alternative would have been to liquidate Intercontinental, which would be risky to the economy.”
The transaction will create the fourth-largest lender in the country, Access Chief Executive Officer Aigboje Aig- Imokhuede told reporters in Lagos yesterday. The process is subject to approval by regulatory authorities, the judiciary and shareholders, so it is “premature” to give details of the terms, he said.
A debt crisis in Nigeria’s banking industry in 2009 forced the central bank to rescue some of country’s lenders by injecting 620 billion naira ($4.1 billion) of capital into them. Eight of the lenders’ chief executive officers were fired and the central bank called for interested parties to bid for stakes in the banks.
Intercontinental’s merger with Access is the second agreement to be announced by the rescued banks after Union Bank of Nigeria Plc said March 23 it signed a memorandum with a group led by African Capital Alliance that will invest $750 million in the bank.
“The retail banking operations of Intercontinental Bank coupled with the wholesale and commercial banking strength of Access Bank offer a high degree of synergy and complementarity unique in the Nigerian banking environment,” the two banks said in a joint statement distributed to reporters yesterday.
Central bank Governor Lamido Sanusi said on March 4 that two rescued banks have signed accords to receive more capital, either through mergers or acquisitions, and four others are close to signing takeover agreements.
Nigeria’s banking industry will have as many as eight mergers in the “near future,” most of them within weeks, Deputy Governor Kingsley Moghalu said Feb. 22.
Asset Management Corp. of Nigeria, a state-owned company, is seeking approval from the central bank to start the second phase of its program to buy bad debts from banks, according to Chief Executive Officer Mustapha Chike-Obi. Intercontinental received more than 146 billion naira from Amcon, as the company is known, the Nation reported on Jan. 11.
The deal is “the best thing that has happened to the shareholders of Intercontinental,” Rewane said.