18 December 2018

Nigeria: Knocks, Kudos As Access Takes Over Diamond Bank

Photo: This Day
Nigeria's Access Bank and Diamond Bank to merge

Shareholders of Diamond Bank Plc have demanded an investigation into the financial institution's "merger" with Access Bank Plc. The deal worth over N23.160 billion cash consideration will see to shareholders of Diamond Bank getting N1 per share.

Nevertheless, they applauded the board's quick resolution in picking the alternative rather than allow degeneration to regulatory bridging, as was the case with Skye Bank Plc.

After a series of denials by Diamond Bank, zero response by Access Bank, and silence from regulatory authorities, both lenders are finally headed for an outright acquisition disguised as a merger.

The Guardian however had earlier predicted that the deal would be sealed in record time despite the denials, with a similarity akin to Access Bank's takeover of Intercontinental Bank Plc in 2012.

Yesterday, Diamond Bank affirmed its submission to the powers of Access Bank, describing the relationship as a union that would create Nigeria's and Africa's largest retail bank by customer-base.

It also admitted that the deal, which completion is subject to certain shareholder and regulatory approvals, is in the best interest of all stakeholders, including employees, customers, depositors, and shareholders.

According to the chief executive officer of Diamond Bank, Uzoma Dozie, the consolidation in the Nigerian banking industry is an inevitable and natural progression. "There is clear strategic rationale for the proposed merger and strong complementarity between the two institutions," he said.

The chief executive officer of Access Bank, Herbert Wigwe, on his part, noted: "Access Bank has a strong track-record of acquisition and integration and has a clear growth strategy. We have a strong financial profile with attractive returns and a robust capital position with 20.1 per cent Capital Adequacy Ratio as at September 30, 2018.

"We believe that this platform, together with the two banks' shared focus on innovation, financial inclusion and sustainability, can bring benefits to Access Bank and Diamond Bank customers, staff and shareholders."

In his reaction, the founder of Independence Shareholders Association of Nigeria, Sunny Nwosu, described the move as a step in the right direction, especially when compared with the Skye Bank case. What Access Bank needs now is to authenticate the deal by holding an extraordinary general meeting of its shareholders once all the regulatory processes are completed, he said.

"What we want to hear is how they will administer such a big institution. This is better than what the Nigerian Deposit Insurance Corporation, Asset Management Corporation of Nigeria, and Central Bank of Nigeria are doing. It is a quoted company versus a quoted company. This shows that it is a peaceful transaction," he said.

The managing director of Proactive Shareholders Association, Taiwo Oderinde, also applauded the development, saying, "Because we are the shareholders of the two banks, we have not lost anything, unlike in Skye Bank. This is a better deal for us as shareholders. All the regulatory parties to the transaction should approve it."

The chief research officer, Investdata Consulting Limited, Ambrose Omodion, further described it as "a good deal for holders of Diamond Bank shares. With the acquisition, Access Bank is to pay Diamond Bank's shareholders N1 per share, plus two units of its shares for every seven units of Diamond Bank's shares."

The co-founder of Noble Shareholders Association, Gbadebo Olatokumbo, however, called for an investigation and sanction against directors superintending activities in the leadup to the bank's failure. "We should start holding these people accountable; they should not be allowed to go free. Those who are behind this must be held responsible," he declared.

A financial and investment analyst, Johnson Chukwu, was skeptical about the use of the key word defining the deal. "It is not believable to say that the deal is a merger when Access Bank is offering N3.13 per share of Diamond Bank, which traded at N0.95 last Friday and appreciated to N1.04 yesterday after the announcement of the merger.

"If one party is paying the other in cash consideration, by buying the other's shares, it cannot be merger, but clearly an acquisition. Basically, they will use a term that will appear positive to the investing public and customers," he said.

Chukwu described the shareholders' decision as proactive, to avoid a scenario like Skye Bank's. "Ultimately, it is better that an operator is saved from possible distress because the investors of Diamond Bank are better now than those of Skye Bank who may have lost some shares," he added.

Another cynical industry expert, who pleaded anonymity, noted: "They can call it a merger or anything. For one thing, Access Bank is known for its aggressive takeover, as in the case of Intercontinental Bank. Again, it does not make business sense for a bank with less than N25 billion market capitalisation to merge with that of more than N200 billion."

In March 2012, Access Bank completed the acquisition of Intercontinental Bank after all relevant regulatory, judicial and shareholder approvals had been granted, a move many observers dubbed "aggressive".

Speaking on the merger, the erstwhile group managing director/chief executive officer of Access Bank Plc, Aigboje Aig-Imoukhuede, said: "The conclusion of this transaction is a significant step forward for the Nigerian banking sector; it has preserved thousands of Nigerian jobs, protected the savings of millions of citizens and laid the foundation for the creation of a truly great, African bank."

But allegations have continued to trail the acquisition of Intercontinental Bank. Claims of underhand tactics remain unanswered, especially in relation to non-performing loans of N16.247 billion in the balance sheet of Intercontinental Bank Plc as at May 31, 2009, held against the then group managing director and deputy managing director of Access Bank Plc.

Indeed, the Financial Reporting Council of Nigeria (FRC) in March 2014 invited the former boss of the defunct Intercontinental Bank, Erastus Akingbola; former CBN Governor Lamido Sanusi; Aig-Imoukhuede; and Herbert Wigwe for a chat bordering on investigations into the accounts.

Later in March 2014, a group of shareholders of Intercontinental Bank Plc approached a Federal High Court in Abuja seeking N10 billion as damages from the former CBN governor over alleged fraudulent banking practices in the sale of Intercontinental Bank to Access Bank Plc.

The plaintiffs, Abdullahi Sani, Adaeze Onwuegbusi and Chijioke Ezeikpe accused Sanusi of conniving with Aig-Imoukhuede, Wigwe and Senator Bukola Saraki to sell the bank in an alleged bid to enrich themselves.

The shareholders pleaded with the court to order the CBN to recover N16.2 billion and N8.9 billion, in addition to accrued interests owed Intercontinental Bank by Aig-Imoukhuede, Wigwe and Saraki.

They also requested the court to declare that the acquisition of Intercontinental Bank by Access Bank through the alleged backing of Sanusi "without any lawful justification whatsoever in a bid to confer corrupt advantage upon himself and his friends/associates/cronies" was illegal, null and void.

They consequently prayed the court to order the Securities and Exchange Commission (SEC) to conduct a comprehensive public enquiry into the acquisition.

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