Although strong denials greeted the initial report last month of ongoing acquisition talks between Access Bank and Diamond Bank, it is now official that both lenders are close to sealing a Merger and Acquisition (M&A) deal that is likely to come into effect either in the first or second quarter of next year.
Already, the Board of Di amond Bank Plc., yesterday, confirmed that following a strategic review leading to a competitive process, it had selected Access Bank Plc. as the preferred bidder with respect to a potential merger of the two banks.
But New Telegraph can, however, confirm that far from being a merger, the deal is an outright acquisition of Tier 2 Diamond Bank by Tier 1 lender, Access Bank.
Findings reveal that Access Bank is attracted by Diamond Bank’s substantial low-cost deposits which, when added to its portfolio, would clearly put the Tier 1 lender in contention as the largest bank by assets in the industry.
In terms of profitability and returns on equity, Access Bank is behind GTBank and Zenith Bank.
Also, according to analysts at Nairametrics, there is speculation that the Dozie family, one of Diamond Bank’s largest shareholders, is keen to have the struggling lender acquired by Access Bank due to some transactions in prior years between the family and the Tier 1 bank.
“It appears Access Bank may have provided the funding used by the Dozies to acquire a significant stake in the bank in prior years, an analysts said. “Any deal short of an acquisition may have thus negatively impacted on the loans, thus the need for the takeover,” he said.
While there had been speculation in recent months that Tier 2 lender, Diamond Bank, was in dire need of fresh capital injection due to its huge Non-Performing Loans (NPLs) portfolio put at over N150 billion, indications that the issue was causing ripples in its boardroom emerged in late October, when the Tier 2 lender, in a statement to the Nigerian Stock Exchange (NSE), announced that the Chairman of its Board, Mr. Oluseyi Bickersteth and three non-executive directors – Mr. Rotimi Oyekanmi, Mrs. Juliet Anammah and Mrs. Aisha Oyebode – had resigned from the bank with immediate effect.
The development raised eyebrows in financial circles given that Bickersteth had only been appointed to that position last June.
Even more significantly, Bickersteth had, in a letter to the Central Bank of Nigeria (CBN), on behalf of the bank’s Independent Directors, debunked the resignation statement, insisting that he remained Chairman and accusing the Chief Executive Officer of the bank, Uzoma Dozie, of poor corporate governance.
However, amidst the boardroom fight, Diamond Bank announced that it had received the approval of the CBN, following its application, to operate as a national bank subject to the conclusion of the sale of Diamond Bank UK-DB UK Plc.
The lender’s CEO said the move was part of Diamond Bank’s strategy to focus on Nigeria’s significant opportunities.
He added that the move followed Diamond’s decision to sell its international operations, which included the disposal of its West African subsidiaries in 2017.
It will be recalled that global credit rating agency, Standard and Poor’s (S&P) had, a few weeks ago, lowered its long- and short-term issuer credit ratings on Diamond Bank P to ‘CCC+/C’ from ‘B-/B’ with a negative outlook, adding that the lender would post losses in the next 12-24 months.
The rating action, according to the agency, reflects the consideration that Diamond Bank is currently dependent on favourable business, financial, and economic conditions to meet its financial obligations.
Although industry analysts, who commented on the planned fusion of Access and Diamond Banks, said they would prefer to wait for a formal statement to be issued by the two financial institutions confirming the development, they however, believe it would create a stronger Nigerian international bank.
An analyst, who did want to be named, also stated that while the acquisition will make Access Bank a top contender for the position of biggest bank by assets in the industry, there is no guarantee that this will lead to greater efficiency in the Tier 1 lender’s operations.
Efforts to contact spokesmen of both banks were not successful, as they neither picked up phone calls nor responded to text messages.
Meanwhile, in a statement to the Nigerian Stock Exchange (NSE), the Diamond Bank Board said that a potential merger of the two banks would create Nigeria and Africa’s largest retail bank by customers.
“The Board of Diamond Bank believes that the merger is in the best interest of all stakeholders, including employees, customers, depositors and shareholders and has agreed to recommend the offer to Diamond Bank’s shareholders.
“Completion of the merger is subject to certain shareholder and regulatory approvals. The proposed merger would involve Access Bank acquiring the entire issued share capital of Diamond Bank in exchange for a combination of cash and shares in Access Bank via a Scheme of Merger.
“Based on the agreement reached by the boards of the two financial institutions, Diamond Bank’s shareholders will receive a consideration of N3.13 per share, comprising of N1.00 per share in cash and the allotment of two new Access Bank ordinary shares for every seven Diamond Bank ordinary shares held as at the Implementation Date,” Diamond Bank stated.
The lender noted that the offer represents a premium of 260 per cent to the closing market price of N0.87 per share of Diamond Bank on the NSE as of December 13, 2018, the date of the final binding offer.
“Immediately following completion of the merger, Diamond Bank would be absorbed into Access Bank and it will cease to exist under Nigerian law.
“The current listing of Diamond Bank’s shares on the NSE and the listing of Diamond Bank’s global depositary receipts on the London Stock Exchange will be cancelled, upon the merger becoming effective. Diamond Bank expects the transaction to be completed in the first half of 2019. We will keep the market updated with any new development,” the lender said.
Commenting on the deal, President, Constance Shareholders Association of Nigeria, Alhaji Shehu Mallam Mikail, said the acquisition is fair, noting that shareholders are still going to have holdings.
“We are expecting that the company will have an understanding with the minority,” he said. “We believe it is better to acquire the bank than allowing it to remain on its own. The non-performing loans for the bank is high and even the one they say are performing is not performing. It is good for shareholders.”
Meanwhile, yields on Diamond Bank’s $200 million Eurobond closed lower at 26.02 per cent yesterday, according to FMDQ data, as investors reacted positively to the acquisition of the retail lender by Access Bank Plc.
The yield on the Eurobond is down from a high of 31 per cent with the bond price rallying to 93.33.
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