Access Merger deal

Tier one lender, Access Bank Plc, will embark on a $250 million tier two capital raise sometime in the second half of next year, despite its claim to have enough capital for the Access/Diamond merger deal. Group Managing Director of the bank, Herbert Wigwe, disclosed this in a press briefing held yesterday.

Also present at the event were Diamond Bank  Managing Director Uzoma Dozie and Access Bank Deputy Managing Director, Roosevelt Ogbonna.

The move follows the announcement earlier this week of merger plans between both banks.

Here are excerpts from the event:

Lessons from the past 

The Access Bank GMD hinted at the possibility of a somewhat easier merger process, as the bank had gained valuable insight from its merger with Intercontinental Bank.

“For us (Access Bank) we bring a very strong capability as far as mergers and acquisitions are concerned. It is not the first, second or third merger we have done. These transactions are extremely complex transactions and require a lot of institutional history and memory.”

He continues

“One of the benefits we have in this combination is that having done this several times before, we have learned from the mistakes of the past. Integrating Diamond is going to be a lot better than all the other ones we have done in the past. The latest one we did was the Intercontinental transaction, which was a large one and basically gave us all the learning points that we needed to bring to bear as far as this one is concerned.”

Access has enough capital for the deal

Herbert Wigwe also put to bed concerns that the bank did not have adequate capital for the transaction.

“Access Bank has enough capacity to consummate this merger without additional capital, but we have also taken new steps in line with international best practice, and the need to create a capital buffer that the new institution being created is one that will be robust not just in terms of size, but adequate capital to support it going into the future.”

More details on the capital raise

In response to a question from Babajide Komolafe on whether the bank would be raising capital, Wigwe gave more details.

“We have concluded with some of our partners to raise tier two capital. That will be ready for drawdown before the end of January – about $250 million dollars.

“The issue of the rights issue which you saw in FT… $200 million additional which is N75 billion. We will soon be calling an Extraordinary General Meeting (EGM) for it to support our capital. That cannot happen now, but sometime next year before the end of the second half. The reason is to make sure that even though we have more than enough capital today, the emergent entity will have the strongest capital base to support an entity of that nature.

Staff

Wigwe also addressed the concerns of the public regarding a potential downsizing of Diamond staff.

Deal book 300 x 250

“I think it is important I speak to the issue of staff, because it is a topical issue. First of all, it will be inappropriate to compare Diamond with Intercontinental. Intercontinental was a CBN intervened bank for two years, before they opened it up to a process. Diamond Bank is a going concern. Diamond Bank has a very active customer base. Diamond has some of the very best people in the industry.

“What we are seeing here is a combination of our talent pool which we are putting together to support this large enterprise. Within Access Bank, we have seen the need for some succession planning, even as we went on. What does this, is that it brings those people in.”

He went on 

“Secondly, the compelling proposition around this is Diamond Bank’s strong retail capability. The idea cannot be to ask people to start going, because once you do that the first thing you are going to do is to lose your customers.”

Wigwe stated that what was important was both institutions continuing to operate in a performance driven methodology. Diamond Bank CEO Uzoma Dozie also stated that himself and Wigwe were having engagements with staff.

Shareholders are key 

Access Bank DMD, Roosevelt Ogbonna, gave an insight into projections from the enlarged entity, stating that shareholders would be key.

“We are doing this to create value. Ultimately when value is created, the main beneficiaries will be the shareholders. This transaction will be value accretive from the first year of legal merge.”

Nothing went wrong with Diamond

Herbert Wigwe also allayed fears that something went wrong with Diamond which led to the merger, stating that nothing went wrong.

“Internationally, mergers happen, if partners see that they can create a bigger pie.”

Uzoma Dozie also disclosed that the move was a voluntary one on the part Diamond Bank, stating:

“We chose our own destiny as Diamond Bank. We had a choice. Do we want to raise capital and go alone? Or do we want to look at a partnership? If you want to go fast, you can go alone, and we have gone very fast creating the fastest growing retail bank. But we want to also go very far as well. To go very far, you need to find a complimentary partner that will address and create value for all stakeholders. The two key stakeholders that are  important were our customers and our staff. If those two are okay, shareholders will be okay.

“In looking at our different options, we wanted one that would preserve value, one that would go beyond raising capital, but creating a bigger platform.”

Merger/Acquisition

Wigwe shed more light on the conundrum on if the transaction was a merger or an acquisition.

“This is a merger executed technically through a scheme of arrangement in respect of which one party is issuing shares for the other.”

Regulators are in the know

The Access Bank GMD also stated that notifications had been sent to all regulatory agencies.

“This thing broke on Sunday. We have since sent our notifications to all the regulatory agencies. The primary agency is the CBN, which has given us a ‘No Objection’ letter. We have notified SEC, PENCOM and the NSE.”

On Diamond Bank UK and PFC 

In response to questions by Nairametrics on Diamond Bank UK and its PFC, Dozie said that Diamond Bank UK is waiting for regulatory approval.

“All documents have been submitted. If the funds arrive before the legal merge, it will come to Diamond Bank and be merged with the final entity.”

PFC licence

On the Diamond Pension Fund Custodian, Wigwe stated that a strategic decision would be taken.

“We will take a strategic decision on if we will sell it or keep it.

Dividend payment 

Deputy GMD of Access Bank, Roosevelt Ogbonna, gave an assurance that the bank would maintain its dividend tradition.

“It is a commitment, which as management, we take fully into account. We realise we have different types of shareholders. There are some who the income is extremely important to, because that’s what they sustain themselves with. We are not going to be irresponsible. Post merger, we will still do as we have done up to date. We will pay dividends. We will continue to pay interim and full year dividends.”

Loan book

Wigwe concluded by addressing concerns about the loan book of Diamond Bank prior to the merger.

“We have enough capital such that after Diamond has written off its bad loans, the new and larger enterprise can continue. Because we are doing that tier two capital raise, we are even increasing and creating even much more capital cover. The new enterprise as large as it may be, will be adequately capitalised.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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