Merger: Access Bank to become Africa’s largest bank with 29m customers

…Sets to raise $250m Tier II capital …Customers will benefit from size of Access Bank’s balance sheet-Diamond Bank boss The merger between Access Bank and Diamond Bank would create a new institution that will become the largest bank in Nigeria and Africa, as its customer base would span three continents, 12 countries, and 29 million clients. This is even as Access Bank disclosed on Wednesday that it had finalised plans to issue $250m Tier II capital in January 2019. Speaking at a joint press conference held in Lagos, on Wednesday, Chief Executive Officer of Access Bank, Herbert Wigwe, explained that the merger, which would be completed by the second half of 2019, will enable Access Bank to leverage the best talents of both institutions to create a leading banking franchise in Nigeria and the continent at large. He explained that Diamond Bank has complementary operating platforms and similar values, and a merger with Diamond Bank, with its leadership in digital and mobile-led retail banking, would accelerate Access Bank’s ambition to become a leading corporate and retail bank in Nigeria and a Pan-African financial services champion. Wigwe noted that the signing of the Memorandum of Agreement and announcement of headline terms, which valued Diamond Bank at approximately NGN72.5 billion ($200m), will see Diamond Bank shareholders receive NGN3.13 per share in cash and shares. “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 Security Exchange Commission, Central Bank of Nigeria and Pension Commission regulatory approvals and FHC sanction expected before the end of H1 2019”, he said. Commenting on the approvals for a Tier II capital issuance, he said: “Access Bank had already finalised terms and obtained regulatory approvals for a Tier II capital issuance to raise 250 million dollars in January 2019. And had also obtained “No Objection” from the Central Bank of Nigeria (CBN) to undertake a Rights Issue to raise to N75bn in the first half of 2019. Wigwe added that shareholder approvals and other regulatory approvals to that effect would be obtained before the commencement of the offer. He noted that the fundraising exercise would accelerate the capital management plan to support retail growth, previously set out in the bank’s five-year strategy. Similarly, Uzoma Dozie, CEO of Diamond Bank, said the merger was positive for all of Diamond Bank stakeholders, including customers, employees, and shareholders. “In particular, customers will benefit significantly through the unrivaled 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, Dozie said. Cost synergies had been conservatively estimated at NGN30 billion per annum, pre-tax, to be fully realised within three years post-completion. 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 on a strategic capital management plan and expect to achieve a post-completion Capital Adequacy Ratio (“CAR”) of 20 per cent at the Bank level and 22 per cent at the Group level. Access Bank had a capital adequacy ratio of 20.1 per cent as at 30 September 2018. It is currently concluding a US$250 million Tier II capital raising exercise in line with its capital plan to provide a robust capital buffer given the current macroeconomic 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. It would be recalled that The Daily Times on Monday exclusively reported that the Central Bank of Nigeria (CBN) had approved Access Bank to acquire Diamond Bank. Motolani Oseni