After initial denial, Access Bank Plc and Diamond Bank Plc have confirmed talks to merge the two banks. The deal will be fully sealed by the first quarter of 2019.
Under the arrangement, Access Bank has been declared as the preferred bidder for Diamond Bank, which will culminate in the creation of Nigeria and Africa’s largest retail bank.
Although, the two banks had denied that both banks were in a merger talks, the Board of Directors of Diamond Bank yesterday announced that, following a strategic review leading to a competitive process, it has selected Access Bank Plc as the preferred bidder.
The board said that it believes that the merger is in the best interest of all stakeholders including, employees, customers, depositors and shareholders and has agreed to recommend the offer to Diamond Bank’s shareholders.
Access Bank will at the completion of the deal become Nigeria’s biggest bank by asset base hitting a N6.1 trillion as shareholders and analyst say the deal is the best for both the banking industry and shareholders of Diamond Bank.
The news of the merger talks had leaked a few weeks ago, it was denied by both parties, but confirmed yesterday through letters they wrote to the industry regulators.
In a statement it issued yesterday, Diamond Bank said that 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.
Based on the agreement reached by the boards of the two financial institutions, Diamond Bank shareholders will receive a consideration of N3.13 per share, comprising of N1.00 per share in cash and the allotment of two new Access Bank ordinary shares for every seven Diamond Bank ordinary shares held as at the implementation date.
The Securities and Exchange Commission (SEC) is aware of the intention of Access Bank and Diamond Bank to merge.
The banks notified the commission and the general public, saying that “it is a notice to merge” while SEC is awaiting their application on the matter
“The SEC received on Monday, December 17, 2018, notice of intention by Diamond Bank and Access Bank to merge. The commission is currently waiting for their formal application,” the statement read.
Although the documents sent by both Access and Diamond mentioned the deal as a merger, analysts say it is more of an acquisition.
According to the arrangement, after the completion of the merger, Diamond Bank would be absorbed into Access Bank and it will cease to exist under Nigerian law. The current listing of Diamond Bank’s shares on the NSE and the listing of Diamond Bank’s global depositary receipts on the London Stock Exchange will be cancelled.
The managing director and chief executive officer of Access Bank, Herbert Wigwe, said that the bank has a strong track record of acquisition and integration and has a clear growth strategy.
“Access Bank and Diamond Bank have complementary operations and similar values, and a merger with Diamond Bank, with its leadership in digital and mobile-led retail banking, could accelerate our strategy as a significant corporate and retail bank in Nigeria and a Pan-African financial services champion,” he said.
“Access Bank has a strong financial profile with attractive returns and a robust capital position with 20.1 per cent Capital Adequacy Ratio (CAR) as at 30 September 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.”
This deal, analysts and investors say is the best shareholders of Diamond Bank could get considering that the offer represents a premium of 260 per cent to the closing market price of N0.87 per share of Diamond Bank on the NSE as of December 13, 2018, the date of the final binding offer.
Founder and the first national coordinator of the Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, told LEADERSHIP that it was a good deal for shareholders, considering that they could have lost everything if Diamond Bank had become distressed.
He stated that it is a good decision for the shareholders of Diamond Bank than losing their entire holdings “as we have seen in Skye Bank.”
The managing director and chief executive of Cowry Assets Management Limited, Johnson Chukwu, said that the merger is a positive deal for shareholders considering that they would be getting a premium of over 200 per cent from the deal in cash and shares.
On the flip side, he said issues such as managing the synergy in such a way that it doesn’t become a burden to Access Bank are paramount. “For instance Diamond Bank has a huge non-performing loan. Their NPL is almost around 10 percent over a total loan book of almost N1.2 trillion that will give about N122 billion. So when they marry with Access Bank the impact is that it may take their non-performing loan a little higher.
In a reaction, Professor Uche Uwaleke of the Banking and Finance Department, Nasarawa State University, said that the merger is a welcome development for the banking industry.
He said: “Given the strengths of the two banks, there is little doubt that the union involving Access Bank’s strong fundamentals with CAR of over 20 per cent and Diamond Bank’s digital-driven services will produce synergies that will be positive for financial inclusion in Nigeria.”
Uwaleke added that the scheme of the merger is a win-win for the shareholders of the two banks.
Some members of staff of the banks who spoke with LEADERSHIP expressed surprise at the news, saying they were not informed while others claimed that it was a rumour.
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