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BUSINESSOld Wine in New Bottle
06/09/12, Biodun Omojola
Arnold Ekpe CEO of Ecobank
Most banks which fail the CBN stress test of 2010 are finally acquired by others despite undisguised murmurings in the industry. Will the acquisitions work?
It is again mergers galore in the Nigerian banking industry. This time though, they are not mergers of friends or equals or of exigencies. Rather they are mergers by acquisition, of the strong acquiring the weak, not to protect or help reposition but to take over, lock, stock and barrel. Among the merger deals is that of Togo-based Ecobank Transnational Incorporation (ETI), through its Nigerian banking arm, Ecobank Nigeria, acquiring Nigerian bank, Oceanic Bank Plc. Known as Oceanic, one the eight banks that failed the 2010 Central Bank of Nigeria (CBN) audit. Before the audit, the bank was seen as a high-flier with its major strength in retail banking. At the time of its acquisition, Oceanic had 400 local branches, confirming its strength in that sector. It also had a couple of off-shore branches.
Acquiring a bank in Nigeria is not new to Ecobank. It had acquired three other Nigerian banks to bolster its strength and reach. By taking over Oceanic, Ecobank Nigeria is now among the top tier of Nigerian banks, moving up in the ranking to number five. Already a new board of directors has been constituted with Arnold Ekpe, Group CEO appointed chairman. John Aboh, the CBN-appointed managing director of Oceanic Bank after the sack of its board by the CBN, continues in that role, probably until the integration of both banks is completed. Under the acquisition terms, Oceanic Bank will be operated as a separate entity for 12 months before it is fully integrated and fused into Ecobank's operations.
Cecilia Ibru, former CEO of Oceanic Bank
Ecobank is upbeat about the deal. New chairman, Ekpe said "Oceanic Bank is a good brand and so its name would be retained." Ecobank is leveraging on its high technology platform to transform Oceanic. According to Ekpe, "We look forward to integrating the institutions and bringing them together as one." So seamless was banking transactions at the early stage of the merger that customers had access to their accounts at any Oceanic Bank or Ecobank Nigeria branch. Now integration appears completed as all Oceanic Bank branches now wear the Ecobank logo.
Other banks that failed the 2010 audit test and were acquired include Intercontinental Bank Plc by Access Bank, Union Bank of Nigeria Plc, by Capital Alliance (a private equity firm), Finbank Plc, by First City Monument Bank Plc, and Equitorial Trust Bank, by Sterling Bank Plc. The Equitorial Trust Bank - Sterling Bank Plc deal is different in that it was a merger of friends. Three other banks, Afribank Plc, Bank PHB Plc and Spring Bank Plc. failed to secure new investors and lost their licences to operate. They now operate under new licences as Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited respectively.
Like any forced unions, there are bound to be casualties and the acquisition has produced just that with many staff sacked. While some banks have issues with their disengaged staff, Ecobank has no such issues. Ekpe had given assurances after the acquisition that "As far as employees of Oceanic Bank are concerned, we have made it very clear that we are looking for the best employees for the two institutions. The employees need not to express fears, but to work harder as every good employee would be retained. But those staff that wish not to continue or eventually not needed will be adequately compensated."
Former CEO of Intercontinental Bank, Erastus Akingbola
Not so with other banks. The sack of Finbank staff has led to protests. Workers claimed management laid them off without paying benefits owed them. They also claim they were sacked verbally. Access Bank too was embroiled in a bit of controversy regarding the sack of Intercontinental Bank staff. They were reportedly sacked via a Short Message Service (SMS) sent to them by the new management. This also led to protests. Disengaged staff of Oceanic Bank had no issues with inadequate compensation.
Some Nigerians queried the acquisition by Ecobank, thus making the bank to clear the air about the deal. According to Aboh "The transaction is an acquisition and not a hostile takeover, so it is to the best interest of both employees and shareholders." The bank's shareholders had, at a court ordered meeting, approved the acquisition by ETI. Following the approval, the bank's entire paid-up share capital of N11, 110, 684, 606: 50 comprising 22, 221, 369, 213 ordinary shares of 50 kobo each was reduced to zero. Also cancelled was every fully paid, issued, and outstanding ordinary share of 50 kobo each, in the paid-up capital of the bank. Aboh said "I must commend Oceanic Bank shareholders for the understanding shown to during the court ordered meeting. I am confident that the acquisition will create significant shareholder value".
Aboh, during the court ordered AGM, said rights of existing shareholders to the scheme shares shall be transferred to ETI. "Through the scheme, holders of Oceanic Bank shares so cancelled, shall receive one ordinary share of $0.025 and $0.428 preference shares of $0.1032, in Ecobank Transnational, credited as fully paid for every 20 ordinary shares of 50 kobo previously held by them in Oceanic Bank, prior to the effective date." Ekpe, speaking at the merger ceremony, said the pricing and structure would benefit stakeholders in both banks.
Before the merger, both banks had two distinct philosophies. Oceanic Bank, with a higher profile than Ecobank, was seen as a grass-roots bank mostly because of its strengths in retail banking. Ecobank, on the other hand, was perceived as conventional with high-end clientele. But as the CBN audit has shown, having a high profile in a profession that is largely conservative may not be prudent. Almost all the banks that failed the CBN audit had high profile, a result of playing the visibility game using the media among other channels. But Ecobank, through Ekpe, has come out to deflate the misconception about the bank's perceived philosophy.
"There is also a fear which I want to debunk, that is, Ecobank is conservative. We are not conservative. We have a low profile and that is not the same thing as being conservative. If you think of a bank that started in Togo and now has presence in 35 countries, more than any other bank in Africa, I think we have been a little bit adventurous, although we don't do things aggressively because I think we focus more on results rather than talk." Despite the diversity, both banks are complementary. Ecobank has its strengths in corporate and international banking while Oceanic is strong in the local market in terms of retail banking and franchise in public sector. A combination of both banks' branches gives the new Ecobank Nigeria about 650 branches, 1,450 Automated Teller Machine (ATM) platforms and customers numbering about five million.
According to Ekpe "Oceanic Bank's acquisition was not a big deal. It was just one of our plans. We have always had the plan to merge Ecobank Nigeria with another bank in order to build a bigger bank because of scale. Whether you like it or not, scale is very important, the bigger you are the more resources you can deploy, the more you can invest in people and services, so we have always believed in scale and we have always looked to see if we could have a partner with the same objectives and work with us to create a bigger bank. It so happened that of all the banks we spoke with, Oceanic Bank seemed to have what we were looking for."
Ecobank, during the Soludo consolidation era, acquired Hallmark Bank, Allstates Trust Bank and Africa International Bank. Ecobank's plan is to be in the top three in all its markets. In Benin Republic, the bank is number two as in Ghana and Mali. It is number one in Togo, Cote d'Ivoire, Burkina Faso, Guinea Conakry and Central Africa, while it is number four in Gabon and five in Senegal. Acquiring an existing bank has always helped it to fast-track the process of being in the top three in its market. This option was successful in Burkina Faso where it was number three but moved to number one after acquiring a local bank. It recently acquired 100 percent of Ghanaian bank, The Trust Bank. The acquisition makes Ecobank Ghana that country's largest bank in terms of assets. It is also in an alliance with South Africa's Nedbank. With more than 1,500 branches in 35 countries the Nedbank-Ecobank alliance is the largest banking network in Africa.
The ETI-Oceanic Bank deal has placed Ecobank Nigeria as one of the top banks in terms of assets, branches, revenue and profit and it will definitely become one of the highest grossing subsidiaries of ETI. Other top tier banks in the Nigeria include First Bank and United Bank for Africa. However, with these recent mergers particularly the Access BankIntercontinental Bank merger, the country's banking landscape is set to be redrawn.
For ETI which began operations in the mid-1980s in the small west African country of Togo at the instance of the West African Chamber of Commerce to provide regional banking services for African businesses across the sub-region, Nigeria has turned out to be a good hunting ground is listed on the stock exchanges in Lagos, Nigeria and Accra, Ghana.
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