As Nigerian banks seek to raise fresh capital after massive loan losses propelled by effects of the oil glut that drove the economy in one of its worst recessions, FIs have started to consider M&A opportunities. One such M&As include Access Bank which has agreed to takeover mid-tier rival Diamond Bank. This will then create Africa’s largest bank by customers in a transaction expected to finalise by H1:19.
Diamond bank’s Chief Executive Officer, Mr. Uzoma Dozie, said in Lagos the board had selected Access Bank as the preferred bidder with respect to a potential merger of both banks. Dozie said the potential merger of the two banks would create Nigeria and Africa’s largest retail bank by customers.
He added that the transaction to be completed in the first half of 2019 was in the best interest of all stakeholders. Dozie said the completion of the merger was 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.
Diamond Bank said the board believed the move was “in the best interests of all stakeholders”. The bank also said its chief executive officer would step down after the merger.
“The board of Access Bank PLC today 18 Dec. announced that it has signed a memorandum of agreement with Diamond Bank PLC regarding a potential merger of the two banks that will create Nigeria and Africa’s biggest bank by customers,” Access Bank said in a statement to the Nigerian stock exchange.
Diamond and Access Bank stocks both rallied nearly 10% on the local bourse.
U.S. private equity firm Carlyle owns a 17.75% stake in Diamond Bank which it bought for $147 million in 2014 when the bank was trading at 0.6x book value as against 0.15x now.
As part of the deal, Diamond Bank said its shareholders would receive 3.13 naira per share, comprising of 1.00 naira per share in cash and the allotment of 2 New Access Bank ordinary shares for every 7 Diamond Bank ordinary shares.
Nigeria’s Security and Exchange Commission (SEC) late on Monday issued a statement in which it said: “It is a notice to merge, they have not merged yet. SEC is awaiting their application on the matter.”
The takeover follows weeks of speculation about Diamond Bank in the wake of the unexpected resignations of its chairman and three other directors in October.
Previous bank mergers in Nigeria have been imposed by the regulator. It was not immediately clear how this deal was agreed.
Diamond bank has been managing its capital since 2016 after huge loan losses worsened by a weak economy forced it to sell its foreign subsidiaries.