The International Finance Corporation (IFC) and its wholly-owned subsidiary, IFC Asset Management Company (AMC) have reached an agreement to divest their 14.1% stake in Ecobank Transnational Incorporated (ETI).
A press release dated 17th June 2019 and signed by Madibinet Cisse, ETI Group General Counsel, and Company Secretary reveals that IFC and AMC have entered into a Share Purchase Agreement with Arise B.V, a foremost Dutch investment firm for the sale of their 14.1% holding in ETI. The transaction is expected to be consummated in the next couple of months subject to due diligence, internal and regulatory approvals.
What you should know: The two companies’, IFC and ETI, collaboration for business purposes dates back to 1993.
- IFC’s investment in Ecobank was originally via a convertible debt (a debt that can be converted to equity at a future date).
- In 2014, Ecobank notified The Nigerian Stock Exchange that the IFC ALAC Holding Company II and the IFC Capitalization (Equity) Fund, L.P. (two funds managed by the IFC, Member of the World Bank Group) will exercise their option to subscribe for ETI shares with effective date of 1st July 2014.
- IFC thus converted the outstanding loans of US$56,385,000 for the IFC Capitalization (Equity) Fund L.P. and US$18,795,000 for the IFC ALAC Holding Company II into 628,742,514 ETI shares and 209,580,838 ETI shares respectively.
- The convertible debts of ETI were then reduced by US$75,180,000. As a result, ETI issued 838,323,352 additional shares.
- The conversion gave the IFC over 6% in ETI by our estimates at the time.
Why exit: IFC loans and subsequent investment in Ecobank has lasted longer than necessary. Both parties have been in talks to dispose of IFC’s interest culminating in the latest announcement. Whilst it is unclear if the IFC lost money in this deal, Ecobank share price has not particularly performed well over the years. The company has also been mired in board room and management scandals.
About Arise BV: Arise B V is a leading private equity firm with focus on small and medium enterprises in middle market, later stage, emerging growth, industry consolidation, buyout, recapitalisations and growth capital investments. It is passionate about investing in sub-Saharan Africa particularly in banks, non-bank financial institutions, insurance, and Fintech companies. The firm only seeks minority stakes and has a combined asset value of over $700 million.