By Etuka Sunday
The Boards of Access Bank Plc (“Access Bank”) and Diamond Bank Plc (“Diamond Bank”) announced 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 (~$200m) and will see Diamond Bank shareholders receive NGN3.13 per share in cash and shares, Access Bank and Diamond Bank are 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% at the Bank level and 22% 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 US$250 million, available for drawdown in January 2019.
Access Bank has also obtained “No Objection” from the CBN to undertake a Rights Issue to raise up to NGN 75 billion (~US$ 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% 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.”