ACA Consortium injects N114b into Union Bank

A Handsome $750 million(about N113 billion) is to be injected into Union Bank of Nigeria Plc.

The funds are coming from African Capital Alliance Consortium (ACA Consortium). The ACA Consortium is a group of Institutional investors led by African Capital Alliance (ACA), a leading independent private equity firm investing in West Africa, principally in Nigeria and Gulf of Guinea.

The Board of Directors of Union Bank announced that it has signed a memorandum of Agreement (the MoA) with the African Capital Alliance Consortium to invest $750 million in the bank. This is follows the earlier announcement that the bank had entered into negotiations with a core investor. The MoA will, in the main, provide a framework for the process by which the bank will be recapitalised.

By this development, Union Bank has emerged the first amongst the nine rescued banks to sign an agreement with a prospective core investor. The announcement and the prospect of the $750 million capital infusion puts the bank on the road to recapitalisation.

However, the entire process will be subject to the approval of the bank’s shareholders, the Central Bank of Nigeria (CBN), the Securities and Exchange Commission, The Nigerian Stock Exchange and the Federal High Court.

Union Bank’s announcement confirmed the CBN Governor’s disclosure that three of the rescued banks, which he declined to name, would sign a Memorandum of Agreement

(MoA) with core investors between now and next week.

The ACA Consortium was founded in 1997 with a mission to build Africa’s Premier private equity investment firm by mobilising capital , technology and management resources from local and International sources to unlock Africa’s private sector potential.

The ACA Consortium, which will invest as Union Global Partners Limited , consists of ACA B-Holding Limited, comprising an ACA managed fund, FMO Netherlands, an International development financial institution and other co-investors, TRG Management LLP, The Keffi GroupVIII LLC, comprising the Keffi Group and other United States-based institutional investors , ABC Holdings Limited, comprising Bank of Botswana and the Discovery Group .

The bank’s recapitalisation by the ACA Consortium will enhance its liquidity, corporate governance and capital adequacy and restore its strong competitive position.

At the outset of the banking sector reforms initiated by the Central Bank of Nigeria (CBN), a new management was constituted for Union Bank under the leadership of Mrs. Funke Osibodu, as Group Managing Director. She has pursued an aggressive debt recovery drive to recoup most of the bank’s Non-Performing Loans (NPLs). Over N40 billion has been recovered. This is in addition to the N120 billion lifeline received from the apex bank. Mrs. Osibodu began a rebranding effort to give the bank’s retail outlets a facelift by making them to be customer friendly.

Although the $750 million investment fund is a huge capital inflow, the percentage holding of the new investor would take a while to determine as a lot of other factors would come into reckoning. Firstly, all forms of regulatory and stakeholders approvals will have to be secured. In addition, the existing shareholders would be prodded on the quantum of additional capital they are willing to inject into the entity, either as corporate or individual investors. Also, with the coming of the Asset Management Corporation of Nigeria, a new chapter has opened for the bad asset firm to make input, as to how it would play to protect its interest in the entity. AMCON has injected about N239 billion into Union Bank as part of its debts purchase function designed to relieve the banking sector of its debt overhang from margin loans granted capital market operators.

Whichever way the pendulum swings, Union Bank is certainly on its way out of the woods, for as a bank official, who spoke in confidence, put it, “N113 billion is a good amount to start with”.