The Boards of Access Bank Plc
(“Access Bank”) and Diamond Bank Plc (“Diamond Bank”) today announce
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 today
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.”
Rationale for and benefits of the transaction
Diamond Bank will benefit from Access Bank’s strong culture of risk
and capital management expertise and a clear strategy for sustainable
growth. Access Bank will take advantage of Diamond Bank’s unparalleled
retail banking expertise and strong digital offering. Together, the two
companies would create one of Nigeria’s leading banks, with 29 million
customers, including more than 13 million mobile customers, as well as
3,100 ATMs and around 32,000 PoS terminals.
Diamond Bank and Access Bank share many of the same areas of focus,
including women, youth, entrepreneurs and the financially excluded and
will be able to further develop their positioning and market leadership
in these growth sectors. Diamond Bank’s corporate customers will also be
able to benefit directly from Access Bank’s corporate expertise in
trade finance, cash management, treasury and corporate finance.
Diamond Bank currently has 19 million customers, including 10 million
mobile users. The combined operation will have relationships with both
MTN and Airtel, ensuring that customers of the merged bank will continue
to access a strong mobile banking proposition. Access Bank and Diamond
Bank also operate from the same technology platform, which the Boards
believe will enable them to complete the integration with minimal
disruption or impact on customers, in addition to generating significant
synergies.
Strong financial profile
Access Bank had a capital adequacy ratio of 20.1% as at 30 September
2018. It is currently concluding a US$250m Tier II capital raising
exercise in line with its capital plan to provide a robust capital
buffer given the current macro-economic 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.
The pro-forma CAR of the combined entity will be in full compliance
with regulatory requirements at the time of completion. However, Access
Bank has also accelerated its capital plan, in which it had anticipated
raising additional capital to fund retail expansion, to ensure that the
quantum and timing take account of the planned merger. It has obtained a
CBN “No Objection” for a Rights Issue of up to NGN75 billion (~US$207
million) to be launched in H1 2019, which will ensure that it continues
to maintain a strong capital buffer above the minimum requirements. A
formal notification for an EGM to seek shareholder approval for the
rights issue will be issued shortly.
The transaction also presents the opportunity for significant cost
synergies to be derived from consolidation of support functions and
processes, the benefits of scale, branch consolidation and HQ
centralisation. These are conservatively estimated to be NGN30 billion
per annum, pre-tax, to be fully realised three years post-completion.
In addition, there are revenue synergies, such as those from the
opportunities created by applying Access Bank’s value chain approach to
Diamond Bank’s existing 19 million-strong customer base, along with the
positive impact of Diamond Bank’s NGN1 trillion low cost deposit base on
Access Bank’s cost of funding, enhanced risk management and yield and
price improvements driven by market share. The funding and capital
synergies are also attractive, with an improved deposit mix, improved
access to capital markets and greater efficiency in treasury operations.
A Joint Implementation and Integration Committee has been established
to ensure that these synergies are properly evaluated and the resulting
profit and growth potential realised.
Management and integration
Access Bank plans to leverage the best talent of both banks and
combine them to create a leading banking franchise in Nigeria. The
combined bank will be led by Access Bank’s current CEO, Herbert Wigwe,
and will retain the Access Bank name. It is intended that the brand will
be redesigned to include strong elements of Diamond Bank’s digital and
retail brand.
Access Bank has a strong track record of M&A in Nigerian banking
and has previously demonstrated its integration capabilities in the
successful acquisition and subsequent absorption of six institutions in
the past 15 years. The same team who led this successful integration
will be responsible for delivering the merger with Diamond Bank and
overseeing the transition to the enlarged entity.
Proposed timetable
The following sets out the envisaged timetable for completion and
associated shareholder and regulatory approvals. The Boards of Access
Bank and Diamond Bank reserve the right to change the timetable if
transaction exigencies require.
17 December 2018 Signing and announcement of proposed merger
Week of 17 December 2018 CBN pre-merger filing
SEC pre-merger notification
NSE notification
December 2018 CBN approval in principle
January 2019 SEC clearance of Scheme of Merger
March 2019 Access and Diamond Banks’ Court-Ordered Meetings
Court sanction
April/May 2019 SEC and CBN final approvals
By end of June 2019 Deal completion
Key numbers
ACCESS BANK as at 30.9.18 DIAMOND BANK as at 30.9.18 Indicative proforma (as reference) as at 30.9.18
Total Assets (NGN’Bn) 4,555 1,555 6,110
Net loans (NGN’Bn) 1,976 730 2,706
Customer deposits (NGN’Bn) 2,475 1,068 3,543
Number of customers (million) 10 19 29
Mobile customers (million) 3 10 13
Digital/financial inclusion customers (‘000s) 6,400 7,000 13,400
Number of branches 400 277 677
Number of ATMs 1,881 1,218 3,099
Cards in issue 5,700,000 10,200,000 15,900,000
Number of POS 17,943 14,115 32,058
Citigroup Global Markets Limited and Chapel Hill Denham Advisory
Limited acted as Financial Advisers to Access Bank while Banwo &
Ighodalo acted as Legal Adviser to Access Bank.
Exotix Capital acted as financial adviser to Diamond Bank and Templars acted as Legal Adviser to Diamond Bank.
– Ends –