Access Bank and Diamond Bank detail proposed merger …to create Nigeria and Africa’s largest retail bank by customers
Access Bank and Diamond Bank detail proposed merger
…to create Nigeria and Africa’s largest retail bank by customers
The Boards of Access Bank Plc and Diamond Bank Plc today announce that they have received “No Objection” from the Central Bank of Nigeria (CBN) regarding a potential merger between the two banks, which is expected to complete in the first half of 2019. Transaction completion is subject to Access Bank and Diamond Bank obtaining shareholder and regulatory approvals (Central Bank of Nigeria, the Securities and Exchange Commission, the Federal High Court (FHC) and the National Pension Commission (PenCom).
Following the signing of the Memorandum of Agreement and announcement of headline terms, which valued Diamond Bank at approximately NGN72.5 billion about $200 million and will see Diamond Bank shareholders receive NGN3.13 per share in cash and shares, Access Bank and Diamond Bank are today announcing further details, including the rationale and benefits of the deal, the estimated cost synergies, the capital management plan and the timetable.
• Merger will form a leading Tier 1 Nigerian bank and the largest bank in Africa by number of customers, spanning three continents, 12 countries and 29 million clients.
• Brings together treasury, risk management and corporate banking expertise with strong retail and digital banking capabilities to create a financial institution operating across the full suite of products for all customer segments.
• Transaction to be concluded via Scheme of Merger following Access Bank and Diamond Bank Court Ordered Meetings expected in March 2019 to approve terms. Subject to shareholder approvals, final SEC, CBN, and PenCom regulatory approvals and FHC sanction expected before end of H1 2019.
• Cost synergies conservatively estimated at NGN30 billion per annum, pre-tax, to be fully realised within three years post-completion. Further revenue and balance sheet synergies to be evaluated by joint implementation committee.
The pro-forma capital position of the merged bank will be in full compliance with regulatory requirements for significant financial institutions with an international banking presence. However, in order to meet international standards of best practice and ensure a robust capital buffer, Access Bank and Diamond Bank have jointly agreed a strategic capital management plan and expect to achieve a post-completion Capital Adequacy Ratio (CAR) of 20 percent at the Bank level and 22 percent at the Group level. The key elements are:
• Diamond Bank to take further impairments in line with IFRS9, to be reflected in year end 2018 results.
• Access Bank has already finalised terms and obtained regulatory approvals for a Tier II capital issuance, which will raise $250 million, available for drawdown in January 2019.
• Access Bank has also obtained “No Objection” from the CBN to undertake a Rights Issue to raise up to NGN 75 billion ($ 207 million) in H1 2019. Shareholder approvals and other regulatory approvals will be obtained before the offer opens. This accelerates the capital management plan to support retail growth, previously set out in the Bank’s five-year strategy.
Commenting on the proposed merger, Herbert Wigwe, CEO of Access Bank, said: “I am delighted to announce that we have received the necessary regulatory approvals to pursue a merger with Diamond Bank, one of Nigeria’s foremost digital and retail banks, subject to final regulatory and shareholder approvals. The combination of our two businesses will create the largest retail bank in Africa by customer base and a very significant player in the Nigerian market. This is a huge step towards the delivery of our goal to bring the power of banking to millions of people across Nigeria and an exciting transaction for Access Bank and Diamond Bank’s customers, staff and shareholders.
“We have a clear plan to maintain our capital strength and are announcing today decisive steps by both banks to ensure their financial stability throughout the process. The overall outcome will be a stable institution with an extremely strong capital adequacy ratio of more than 20 percent following completion of the merger, which will be a leading competitor in all the markets in which it operates.
“Access Bank and Diamond Bank have complementary operating platforms and similar values, and a merger with Diamond Bank, with its leadership in digital and mobile-led retail banking, will accelerate our ambition to become a leading corporate and retail bank in Nigeria and a Pan-African financial services champion. We look forward to bringing our discussions to a successful conclusion and delivering the benefits of the merger to our staff, customers, shareholders and other stakeholders.”
Uzoma Dozie, CEO of Diamond Bank, said: “The merger is positive for all of Diamond Bank stakeholders, including customers, employees and shareholders. In particular, customers will benefit significantly through the unrivalled combination of the best of Diamond Bank’s retail and digital leadership with the size of Access Bank’s balance sheet, corporate names and geographical reach.
“In reaching this decision, the shared passion for leveraging Nigeria’s youthful and entrepreneurial talent, and a commitment to better outcomes through financial inclusion have convinced us that this is the right combination.
“I believe that the combination of two strong and admired brands, with shared values and complementary strengths, will be a strong force for positive change in the Nigerian and African retail landscape. As a result, this merger creates significant potential for sustainable long-term growth which stands to benefit customers, employees and shareholders alike.”
Rationale for and benefits of the transaction
Diamond Bank will benefit from Access Bank’s strong culture of risk and capital management expertise and a clear strategy for sustainable growth. Access Bank will take advantage of Diamond Bank’s unparalleled retail banking expertise and strong digital offering. Together, the two companies would create one of Nigeria’s leading banks, with 29 million customers, including more than 13 million mobile customers, as well as 3,100 ATMs and around 32,000 PoS terminals.
Diamond Bank and Access Bank share many of the same areas of focus, including women, youth, entrepreneurs and the financially excluded and will be able to further develop their positioning and market leadership in these growth sectors. Diamond Bank’s corporate customers will also be able to benefit directly from Access Bank’s corporate expertise in trade finance, cash management, treasury and corporate finance.
Diamond Bank currently has 19 million customers, including 10 million mobile users. The combined operation will have relationships with both MTN and Airtel, ensuring that customers of the merged bank will continue to access a strong mobile banking proposition. Access Bank and Diamond Bank also operate from the same technology platform, which the Boards believe will enable them to complete the integration with minimal disruption or impact on customers, in addition to generating significant synergies.
Strong financial profile
Access Bank had a capital adequacy ratio of 20.1 percent as at 30 September 2018. It is currently concluding a $250m Tier II capital raising exercise in line with its capital plan to provide a robust capital buffer given the current macro-economic environment.
The Board of Diamond Bank has confirmed to Access Bank that it intends to take a further impairment on its loan book in line with its IFRS 9 implementation by its financial year end on 31 December 2018. Access Bank has sufficient capital headroom to conclude its merger with Diamond Bank after the write down.
The pro-forma CAR of the combined entity will be in full compliance with regulatory requirements at the time of completion. However, Access Bank has also accelerated its capital plan, in which it had anticipated raising additional capital to fund retail expansion, to ensure that the quantum and timing take account of the planned merger. It has obtained a CBN “No Objection” for a Rights Issue of up to N75 billion ($207 million) to be launched in H1 2019, which will ensure that it continues to maintain a strong capital buffer above the minimum requirements. A formal notification for an EGM to seek shareholder approval for the rights issue will be issued shortly.
The transaction also presents the opportunity for significant cost synergies to be derived from consolidation of support functions and processes, the benefits of scale, branch consolidation and HQ centralisation. These are conservatively estimated to be N30 billion per annum, pre-tax, to be fully realised three years post-completion.
In addition, there are revenue synergies, such as those from the opportunities created by applying Access Bank’s value chain approach to Diamond Bank’s existing 19 million-strong customer base, along with the positive impact of Diamond Bank’s N1 trillion low cost deposit base on Access Bank’s cost of funding, enhanced risk management and yield and price improvements driven by market share. The funding and capital synergies are also attractive, with an improved deposit mix, improved access to capital markets and greater efficiency in treasury operations.
A Joint Implementation and Integration Committee has been established to ensure that these synergies are properly evaluated and the resulting profit and growth potential realised.
Management and integration
Access Bank plans to leverage the best talent of both banks and combine them to create a leading banking franchise in Nigeria. The combined bank will be led by Access Bank’s current CEO, Herbert Wigwe, and will retain the Access Bank name. It is intended that the brand will be redesigned to include strong elements of Diamond Bank’s digital and retail brand.
Access Bank has a strong track record of M&A in Nigerian banking and has previously demonstrated its integration capabilities in the successful acquisition and subsequent absorption of six institutions in the past 15 years. The same team who led this successful integration will be responsible for delivering the merger with Diamond Bank and overseeing the transition to the enlarged entity.
Citigroup Global Markets Limited and Chapel Hill Denham Advisory Limited acted as Financial Advisers to Access Bank while Banwo & Ighodalo acted as Legal Adviser to Access Bank.
Exotix Capital acted as financial adviser to Diamond Bank and Templars acted as Legal Adviser to Diamond Bank.
Stanbic IBTC emerges biggest winner at 2018 NSE CEO Awards
In validation of their market leadership, expertise and the high standard of service quality to both local and international clients, Stanbic IBTC Stockbrokers Limited and Stanbic IBTC Capital Limited, members of Stanbic IBTC Holdings PLC, emerged the biggest winners at the recently held 2018 NSE CEO Awards, picking five out of ten award categories.
Stanbic IBTC Stockbrokers Limited won two awards for dealing member firm with the highest volume of transactions and dealing member firm with the highest value of trades while Stanbic IBTC Capital Limited was joint winners of the award for issuing houses with the highest number of primary market transactions (equity), joint winners of award for issuing houses with the highest number of debt issuance (corporate bonds), and joint winner of the award for the Issuing houses with the largest deal of the year for the period under review.
For the seventh consecutive year, Stanbic IBTC Stockbrokers Limited was named the Best Dealing Member Firm on the Nigerian Stock Exchange. The 2018 NSE CEO Awards, which held in Lagos on Wednesday 12 December 2018. The firm was commended for a high performance culture that has enabled it maintain its leadership position in the Nigerian capital market.
The prestigious NSE CEO Award, which previously had four award categories, was this year increased to ten to reflect the dynamic nature of the market. The award recognises compliance, excellence and exceptional performance by market operators in a given year. Organisers of the awards seek to reward outstanding contributions to the growth and development of the Nigerian capital market as well as the Exchange.
During the period under review, Stanbic IBTC Stockbrokers Limited retained its position as the largest stockbroking firm in Nigeria, consistent with its past performance and market status held since 2013.
Mr. Oscar Onyema, Chief Executive Officer, Nigerian Stock Exchange (NSE), noted that Stanbic IBTC Stockbrokers Limited’s consistent performance over the years reflects a robust strategy to set clear values, objectives and processes to ensure that investors derive optimal value from their investments. He urged the organization not to rest on its oars as the NSE, in collaboration with other stakeholders, will continue to nurture the Nigerian capital market into a world-class hub.
In her remarks, Chief Executive, Stanbic IBTC Stockbrokers Limited, Mrs. Titi Ogungbesan, said the company is delighted to win the NSE CEO award again this year, which validates the appetite and growing capacity of the stockbroking firm to provide robust services in the capital market.
“We are excited to be recognized for our efforts and impressive performances in the Nigerian capital market. The awards reflect our strong commitment to consistently deliver relevant, innovative and timely solutions to our ever-growing local and foreign clientele,” Ogungbesan stated, adding that continuously providing top-notch service and value to its clients is a top priority for the firm. These have enabled it maintain very strong and lasting relationships with clients and consequently positioned the organisation in good standing to improve its market share.
Also speaking on the awards, Chief Executive, Stanbic IBTC Capital Limited, Mr. Funso Akere, said the company will continuously strive for the highest corporate governance, compliance and performance with a view to reinforcing investor confidence in the Nigerian capital market. “We will continue to play our part by putting in the public domain initiatives and strategies that would help all stakeholders, especially investors, to be better informed about developments in the capital market, which will help them in making informed investment decisions,” he said.