Lucky Fiakpa
29 December 2008
Bank PHB acquisition bid of Spring Bank was seen as a done deal when it announced that it had successfully completed its mandatory bid for the acquisition of over three billion shares of the bank and a new board constituted almost immediately following approval from the CBN until a group of aggrieved shareholders came with an injunction attempting to halt the process, Lucky Fiakpa writes
The acquisition process of Spring Bank by Bank PHB may well move from the boardroom to the courtroom for final settlement of the various issues veiling it at the moment. Bank PHB a fortnight ago announced cheerfully that it had successfully completed its mandatory bid for the acquisition of over three billion shares of Spring Bank.
But some aggrieved shareholders of Spring Bank Plc, who claim that Bank PHB did not meet the statutory requirements to make the so-called "mandatory bid" advertised on Monday, December 1, 2008 where it sought to acquire majority shareholding in the Bank last week secured an injunction at a Federal High Court, sitting in Abuja against Bank PHB's purported takeover of Spring Bank Plc. Also affected by the injunction are Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), Nigeria Stock Exchange (NSE), First Registrars Limited and the Interim Management Board (IMB), whose tenure is expected to come to a close on December 31 2008.
While Bank PHB claimed in the mandatory bid that they had acquired about 33 per cent stake in Spring Bank Plc, the shareholders argue that included in the basket of shares were the highly contentious "rejected shares" and "warehoused shares", both of which amount to almost 20 per cent of the Bank.
The shareholders argue that the "mandatory bid" was undertaken in disregard of the provisions of the law guiding acquisitions, a trend that had come to be associated with the tactics thus far adopted by Bank PHB also believed to be working in concert with the regulatory agencies, especially SEC and CBN.
The "rejected shares" had been a subject of many petitions since 2006. It relates to the shares fraudulently acquired by some directors of legacy Guardian Express Bank Plc, one of the six banks that merged to form Spring Bank, which was clearly confirmed in the joint investigation report of CBN/NDIC released in October 2007 and subsequently by the report of the Nigeria Police Special Fraud Unit released on 1st July, 2008. The EFCC is also known to have reached the same conclusion on the matter.
The aggrieved shareholders complained that those shares were acquired by Bank PHB earlier this year from the said directors in contravention of the law. They argued further that the shares ought to have been voided and returned to the bank in line with the various findings, and indeed, the directors prosecuted in line with the suggestions contained in the letter of the Attorney-General of the Federation to the CBN Governor.
The "warehoused" shares, which also account for about 10 per cent of the shares of Spring Bank, were allegedly sold to Bank PHB via a proxy named Westcom Technologies and Energy Services Limited. It is believed that the sale of this block of shares had been orchestrated to support the illegal acquisition agenda of Bank PHB. It is said that all the rules guiding exchange of shares in the capital market were broken in the transaction which was presided over by the Interim Board and lacked transparency.
The shareholders had also wondered why the acquisition of Spring Bank Plc had been taken by Bank PHB and all its collaborators in government and the regulatory agencies as a "do-or-die affair."
It prayed the court to put a stop to what could only be likened to 'daylight robbery' on the part of Bank PHB.
Injunction After an Action
But can an injunction given after the action has taken place be of any effect? This may well be one of the issues to be argued at the resumed sitting of the court on December 29, 2008. As at the time the court was granting the injunction, not only has the various authorities given the nod to Bank PHB to constitute a new board for Spring Bank the board, as a matter of fact, was already in place.
Following the successful acquisition of Spring Bank Plc by Bank PHB, the Central Bank of Nigeria (CBN) approved the constitution of a new board for Spring Bank.
Bank PHB submitted a list of 11 names, comprising three executive directors and six non-executive directors as well as the managing director and chief executive officer, which the CBN has approved.
Leading the new board is Vincent Omoike, currently chairman of the CBN appointed Interim Management Board (IMB) of Spring Bank who is being retained as the chairman of the new Board.
Vincent Omoike is a professional banker and a Chartered Accountant, having joined the Central Bank of Nigeria (CBN) as a teenager and rose through the ranks and retired in 2003 as Director, Banking Operations.
To lead the new management team is Mr. Charles Ojo. He was until this appointment Executive Director in charge of the Abuja branch of Bank PHB. An exceptionally skilled banker, with over 18 years banking experience, his background spans corporate and project finance, structured finance, credit and marketing.
Ojo has attended a number of professional courses locally and off-shore. He is an Associate member of the Chartered Institute of Stockbrokers of Nigeria and also an alumnus of both the prestigious Executive Development Programme of the Wharton Business School at the University of Pennsylvania, USA and Lagos Business School.
Other members of the 11 man board include Elisha Olarenwaju Fagbohun, Executive Director, Kingsley Umadia, Executive Director, and Anogwi Anyanwu also an Executive Director. The non executive directors include, Adebayo Adewakun formerly a director of Bank PHB, Vincent Okwechime, Francis Atuche MD/CEO Bank PHB, Suleiman Ndanusa outgoing MD/CEO of the CBN-appointed board of Spring Bank, Niyi Oyedele and Olukayode Falowo. The new board assumed duties last week Monday.
Acquisition Best for Spring Bank
The decision by Bank PHB to acquire Spring Bank is however seen as the best thing that can happen to the latter in this circumstance as this will add value to the shareholders of both banks. Analysts at Renaissance Capital (Rencap), a leading emerging market institutional investor, in a detailed report, hailed Bank PHB's acquisition of Spring Bank. Rencap stated that this is not only a good deal for Bank PHB and Spring Bank's shareholders but also for customers, regulators, and employees.
Customers of both banks, according to the report, will benefit from the emergent institution's expanded distribution network as "they will also have the additional comfort of banking with a much larger bank and extended product offerings."
The Rencap report notes that "regulators will welcome the consolidation of Spring Bank into a larger and well respected financial institution. As a member of the Bank PHB Group, the Spring Bank franchise will finally be able to focus on serving its customers and play its part in the development of Nigeria's banking universe."
Bank PHB is rated as one of Nigeria's fastest growing banks with an average growth rate that is three times the Nigerian banking industry average.
Bank PHB closed its 2008 financial year with gross earnings at N87 billion, 141 per cent higher than the gross earnings of N36 billion made in 2007. This is almost twice the estimated banking industry growth rate of 76 per cent within the same period. Profit before tax at N26 billion was 153 per cent higher than the profit of N10 billion in the previous financial year against the estimated banking industry growth rate of 81 per cent.
Profit after tax at N19 billion was also more than twice the N7 billion posted last year.
Bank PHB's closing deposit base of N718 billion ranks it among the top five in deposits in the Nigerian banking industry with a growth rate of 133 per cent over a deposit base of N306 billion in 2007 showing a steady increase in confidence of the banking public in the bank. The bank not only surpassed the industry growth rate in deposits of 86 per cent in the period under review but now controls a healthy six per cent of Nigerian banking industry deposit market.
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