Category Archives: nigeria

Nigerian Banks – Diamond and Access to merge

After weeks of speculation, Diamond and Access Banks announced a merger to create the largest bank in Nigeria.

It was reported that the Diamond Bank spurned offers to inject critical capital from US private equity firm, Carlyle that was a key shareholder in the bank and sought other deals, and the statement points to a competitive process out of which Diamond selected Access Bank.

According to an FT report, the deal values Diamond at just over $200 million and would create Nigeria’s biggest bank by both deposits and assets and that the merged entities would have 650 branches and 6,800 that would see some savings through redundancies.

Access will acquire Diamond through a combination of cash and shares with Diamond shareholders receiving Naira 3.13 per share, comprising N1.00 per share in cash and the allotment of 2 new Access Bank ordinary shares for every 7 Diamond Bank ordinary shares held.

The merger will result in the end of Diamond Bank with listings of its shares cancelled at the Nigeria Stock Exchange and the London Stock Exchange when the merger is completed in the first half of 2019. Access is listed in Nigeria, while Diamond was also caught up in the Nigeria vs. MTN forex case.

The Banker Magazine ranked five Nigerian banks among 1,000 top global banks with Zenith, Guaranty Trust, FirstBank, Access Bank and United Bank for Africa featuring. Another ranking of the top banks in Nigeria in 2017 listed Nigeria Zenith, Guaranty Trust, First Bank of Nigeria, Ecobank Nigeria, Access Bank, United Bank for Africa, Diamond Bank, Union Bank of Nigeria, and Fidelity Bank. The banks with a presence in Kenya are Guaranty Trust Bank (GTBank), Ecobank and United Bank for Africa (UBA).

Nigeria fines MTN’s Banks over Forex breach

A few weeks after the Central Bank of Nigeria (CBN) directed local commercial banks to refund foreign currency (forex) it says telecommunications giant MTN had banked through them, the CBN has gone ahead to debit the accounts of two banks it cited for facilitating what it termed as illegal capital repatriation from Nigeria.

The banks mentioned were Standard Chartered, Stanbic IBTC,  Citibank, and  Diamond Bank which were all directed to refund a total sum of $8.13 billion for breaching Nigeria’s forex rules on behalf of MTN.

It was later reported that the CBN had debited N2.4 billion ($7.9 million) in fines from Standard Chartered and N1.2 billion from Citigroup. The CBN spokesman said they had investigated the remittance of forex by the banks related to irregular certificates of capital importation (CCI’s) issued to offshore investors of MTN and concluded that $3.45 billion was repatriated by Standard Chartered Bank, $2.6 billion by Stanbic IBTC, $1.7 billion by Citibank Nigeria and $348 million by Diamond Bank between 2007 and 2015.

MTN had been in talks to raise funds, possible do an IPO in Nigeria which is their largest market, like a recent one in Ghana. In various statements to shareholders on the matter, MTN said they are a law-abiding corporate citizen and that the issue of historic dividends allegedly repatriated by MTN Nigeria between 2007 and 2015 had been investigated and concluded at the Nigerian senate which found that there was no collusion to contravene forex laws.

MTN’s has since sued the CBN and Attorney General of Nigeria to restrain them from taking further action against assets of the company.

EDIT: December 24, 2018:

After discussions between the Central Bank and MTN, a settlement deal was arrived at which will see MTN pay just US$53.2 million,  a tiny fraction of the $8.1 billion the Bank had sought from the group’s subsidiary in the West African country.

Paper Planes: Big Day for African Airlines on Paper

July 18 was a big day for various African airlines with news affecting travel in different parts of the continent, ahead of the Farnborough Airshow in the UK.

Nigeria announced plans to revive a national airline – Nigeria Air, a new private sector led-airline in which the government would own no more than 5% and would not manage. It is planned to start flights in December with a target of serving 81 destinations. The launch was officiated by the Nigerian Minister of State for Aviation at Farnborough and he said that they were in talks with Boeing and Airbus and also financiers such as Standard Chartered Bank. The new airline was shown in the livery of new Boeing 737 Max and Airbus A330 models. 

Just a few days after leaders of Ethiopia and Eritrea announced a cease-fire and made historic visits to each other’s countries, Ethiopian Airlines made it’s first flight since 1998  to Eritrea. On the flight were many families reuniting, and former Prime Minister former Hailemariam Desalegn. The flights will be seven days a week, between Addis and Asmara and Ethiopian,  which is expected to be part of some privatization program, was also reported to be planning to invest in a 20% stake in Eritrean Airlines.

Also there are reports that Ethiopian Cargo, Africa’s largest cargo operator, is to sign a joint venture with parcels and logistics giant DHL that would see DHL take up a 49% stake in the company.

A few days ago, Air Tanzania received its first Boeing 787 Dreamliner, which is expected to carve some routes in East Africa that are controlled by Kenya Airways and Rwanda Airlines.

Also at Farnborough, Uganda Airlines signed an MOU for two A330-800 Neo planes which they would fit in a three class-layout.

Earlier the same day, Uganda (National) Airlines announced an order with another manufacturer Bombardier for four CRJ900 planes.

Kenya Airways continues to market new routes Mauritius, Cape Town and the new direct non-stop flights to New York that will start in October 2018.

At Farnborough, Embraer and Kenya Airways announced a spare parts deal.

South Africa Airways celebrated Nelson Mandela’s 100th birthday with some new livery on some planes.

The revival comes all comes at a time when African Airlines now account for just 20% of the air traffic from the continent, down from 60% in a decade as Gulf carriers have made great strides in the continent. African airlines have also struggled with financial performance and management, with only Ethiopian posting consistent profits in the last decade. And, notably,  the deals announced at Farnborough lack detail on the financing aircraft, with Boeing 787’s and Airbus A330’s each having official prices of over $200 million.

Earlier, Skytrax published its list of the top 100 airlines in the world and it featured some African airlines including Ethiopian Airlines (at number 40), South African Airways (45), Air Mauritius (69), Air Seychelles (82), Kenya Airways (85) and was topped by Singapore, Qatar, All Nippon, Emirates and Eva Air. Other awards for African airlines were in categories of best airline staff service (South African Airways), best regional airline (Royal Air Maroc), best low-cost airline ( Mango) and best African airline (Ethiopian).

EDIT: More from Farnborough – via Leeham News & Comment.

  • Air Botswana signed a firm order for two ATR72-600s.
  • Mauritania Airlines placed a firm order for two E175s that will deliver next year.

Zenith Money Market Fund

The initial public offering of the Zenith Money Market Fund closes today.

Here’s a peek at the prospectus from which comes from asset management wing of Zenith, Nigeria’s biggest bank by revenue and assets. Others in the top ten would include FBN Holdings, United Bank for Africa (UBA) Access Bank, Guaranty Trust Bank, Diamond Bank, Ecobank Nigeria, Fidelity Bank, Union Bank and Skye Bank

  • It was to run from September 25 to October 13 – (but seems to have been extended  October 27)
  • The offer aims to raise 1 billion Naira (approx. 295 million Kenya shillings) and the minimum investment to join is 10,000 Naira (approx. $28 or Kshs 2,940)
  • The fund manager Zenith Assets Management also managers other funds – Zenith Equity Fund, Zenith Ethical Fund, and Zenith Income Fund.
  • Zenith Managers has 298 million Naira in assets (down from 352 million) in 2015 and 857 million in 2013. They had a profit of 20 million Naira in 2016 (down from 67 million in 2015) as personnel cost doubled in 2016
  • It is an open-ended fund in which the fund manager will own 5% and an investment committee will advise and guide the Fund Manager on investment decisions.
  • The asset allocation of the fund will be treasury bills and short-term government securities (25-100%), and other money market securities (10-75%)
  • The fund trustee is Vetiva Trustees, custodian is Stanbic IBTC Bank, and auditors are
    KPMG.
  • For the issue, costs are estimated to be Naira 20.2 million (about 2%). Rating agency is Agusto & Co and Reporting accountants are Pro Edge Partners
  • The fund will attract an annual 1% management fee.
  • For the money market fund, Zenith projects to have assets of 1.5 billion Naira at the end of 2017, and 3.9 billion in 2019 and on to 12 billon in 2021.

Also see

Atlas Mara Prospectus Peek

EDIT August 6 2018: Atlas Mara announced that it has reached agreement in principle for a $40M new debt facility to replace the convertible bond issued to Fairfax Africa Holdings. The new debt, maturing in  July 2021, is at an average rate of10.5%, and is secured by a portion of the company’s indirect shareholding in Union Bank of Nigeria. It includes 12,400,000 detachable warrants that on exercise each allows the holder to subscribe for one ordinary share of the company at an initial strike price of $3.20.

EDIT August 30 2017: Atlas Mara is pleased to announce the closing of the offer period for the recently launched Placing and the Open Offer on 29 August 2017. The Placing and Open Offer, together with the recently announced strategic investment from Fairfax Africa (comprising a Mandatory Convertible Bond and a Firm Placing) constitutes “the Strategic Financing”. The Strategic Financing will support Atlas Mara’s growth initiatives in the acquisition of additional equity interests in Union Bank of Nigeria Plc (“UBN”) and scaling up the Markets and Treasury and Fintech business lines. ..Bob Diamond, Chairman of the Board of Atlas Mara, said: “We are thrilled to have Fairfax Africa as our long-term partner. This transaction puts Atlas Mara in a very strong position to deliver on our strategic goals. We remain focused on execution and delivering on cost discipline and profitability.”

Published August 19 2017: Atlas Mara is selling 44.44 million new shares at $2.25 each to raise $100 million. Atlas Mara is acquiring 13.4% equity in Union Bank Nigeria (UBN), from Clermont Group for $55 million, increasing its stake to 44.5%.

This offer aims to raise $30 million from Fairfax Africa (a Canadian investment holding company that is listed on the Toronto Stock Exchange) by selling them 13.33 million shares at $2.25 each. Fairfax will also sign up for $100 million of mandatory convertible bonds due in 2018. It is intended that the funds raised from the issue of the mandatory convertible bonds will be used to fully fund the UBN purchase and the remainder be used to fund the bank (expansion of the market, treasury and fintech business lines and product offerings) and participate in the UBN rights issue.

Atlas Mara is a company incorporated in the British Virgin Islands (largely a tax-free territory – no income, withholding or capital gains taxes) and is the holding company for a group that provides bank and financial services across sub-Saharan Africa which they intend to disrupt. Atlas Mara was formed in November 2013 by Atlas Merchant Capital LLC and the Mara Group, led by Robert E. Diamond Jr. and Ashish J. Thakkar, respectively. In 2016, Atlas Mara had $2.7 billion assets and $ 9 million profit in 2016.

Africa footprint: Besides UBN, they also own 100% of Finance Bank of Zambia (the 5th largest bank in Zambia, serving 2 million people), and 62.1% of Banque Populaire du Rwanda (swelled by a merger with BRD Commercial Bank). Also ABC Holdings – Botswana (owned 62.13% by the Company and 37.87% by Atlas Mara Financial) owns 100% of African Banking Corporation Zambia, 100% of ABC Holdings (Zimbabwe), 68% of Tanzania Development Finance Corporation, 97% of African Banking Corporation of Tanzania, 100% of African Banking Corporation of Mozambique SA, and 100% of African Banking Corporation of Botswana

Atlas shareholders are Guggenheim Partners Investment Management (11.22%) Wellington Management Company, LLP (9.91%) Owl Creek Asset Management, LP (7.99%), Trafigura Holding (6.23%), UBS Asset Management: O’Connor (8.10%) Janus Capital Management LLC (3.92%). Of the founders, Atlas – AFS Partners LLC has 0.5% and Mara Partners FS has 0.13% while Mr. Diamond beneficially owns 1,000,000 Founder Preferred Shares and Mr. Thakkar beneficially owns 250,000 Founder Preferred Shares.

UBN is a mid-tier bank with about 3% market share of assets and loans and deposits in Nigeria. It was established in 1917 and rescued from insolvency in 2009 along with other banks. It now has 3 million customers, 900 ATM’s and 414,000 mobile banking users and, in 2017, UBN  signed agreements with Visa and MasterCard

UBN Plans: While Atlas Mara is not going for a majority stake in UBN (though they may choose to do this), they will;
– Push UBN to be a leading Tier II bank in Nigeria
– This will be done using fintech and treasury initiatives
– They will use UBN to secure more lending
– After 2019, they will push UBN to be a Tier I bank by acquiring another Nigerian bank

Risks facing UBN: Nigeria has recently experienced significant depreciation of the Naira, inflation and economic recession. Also, UBN’s loan book is exposed to the oil and gas sector which comprises 47% of its lending. Also, there is currently a 12.9% free float of UBN’s shares, which is below the mandatory 20% free float requirement prescribed by the Nigerian Stock Exchange Listing Rules.

Fees: $1.9 million will be paid to Atlas Merchant Capital LLC, the investment fund co-founded by Bob Diamond, upon completion of the transaction.

The deal deadline is 29 August.

Extracts from the Atlas Mara prospectus.