Mergers/Acquisitions: Fidelity Bank Nigeria To Acquire Bailed Out Bank

REGINALD IHEJIAHI,

Financial Analyst Queries Decision

Nigeria’s Fidelity bank Plc has said it is interested in acquiring one of the nine banks recently rescued by the central bank.

Fidelity spokesman, Emma Esinneh told THEWILL in a conference call on Wednesday that the bank had made its intention known to the central bank and was waiting for instructions on how to proceed. 

“Yes I can confirm that Fidelity Bank has made its intention to buy one of the rescued banks known to the CBN, we are yet to make a formal bid and I will not name the bank now.”

“ Before we made our decision, we considered our strategic interest, key cultures, legal matters, and ownership issues that we may have to contend with. We will keep you posted as events unravel,” he said.

The central bank recently injected N600 billion naira into nine banks after an audit exercise. The beneficiary banks were Oceanic Bank, Fin Bank, Intercontinental Bank, Bank PHB, Union Bank, Afribank, Wema Bank, Spring Bank and Equitorial Trust Bank.

Lamido Sanusi, the regulator bank boss not long ago expressed his willingness to entertain offers for the rescued banks from both domestic and foreign investors.

THEWILL had earlier reported that four Nigerian banks were positioning for mergers and acquisitions. We named GTBank, First Bank, Zenith Bank and UBA, which are the country’s biggest banks in terms of assets and liquidity.

Fidelity’s bold move is seen as strategic but ironic by financial analyst Chuck Biosah of Invest IQ / CEB ABL Audit Group. In a note made available to us, he said, “It is pretty ironic that Fidelity Bank which appears to be one of the weakest of the non-bailed out banks is considering acquiring a bailed out bank.

The bank shares are trading at N2.53 per share with outstanding shares of approximately 34 billion. The Bank recently reported a full-year pretax profit of N3.77 billion naira, a 77% drop from its disclosure for the same period last year.

Considering the three traditional methods of merger and acquisition as listed below, Fidelity does not appear to have the wherewithal to acquire any of the first five bailed out financial institution

·  Acquiring all assets and liabilities of a firm through the use of cash/or securities. The firm ceases to exist and the current shareholders receive cash/or securities. This requires at least 50 percent approval of the stockholders.

·  Acquiring firms can use a tender offer by buying shares directly from shareholders and by passing the management of the company.

· The acquirer can directly purchase the assets of the target firm and payment is made to the firm rather than directly to its stockholders,” he concluded.

The bank on Tuesday announced it made a pre-tax profit of N3.77 billion naira and noted that it set aside N72.27 billion naira for losses.