Nigeria: Merger – Experts Predict Strong Earnings for Access Bank

This Day (Lagos)

Goddy Egene and Abidon Eromosele

11 January 2012

Analysts at FBN Capital Limited has stressed that investors should expect the impact of Access Bank Plc’s acquisition of Intercontinental Bank Plc to reflect on the banks earnings in the months ahead noting that the impact will be slightly visible in the fourth quarter of 2011 and 2012.

The analysts who made this known in a review of the banking sector said: “In 2013 however, we believe the earnings accretion from the acquisition will not only be visible but significant. As such, we believe the market’s doubts regarding the benefits of the merger are likely to fade as we move through 2012.”

The analysts added: “Going forward, as Access Bank consolidates Intercontinental Bank, we expect total assets and deposits to almost double. Initially, we expect Intercontinental to remain loss-making, though significantly less than the run-rate before the capital injection by the Asset Management Corporation of Nigeria (AMCON) – and to a lesser extent, Access. We forecast approximately N3.5 billion pre-tax loss for Intercontinental in Q4 2011), slightly offset the N5.1billion we have modelled for Access on a stand-alone basis.”

Shareholders of Access Bank Plc and Intercontinental Bank Plc had recently voted overwhelmingly for the merger of both banks, at separate Extraordinary General Meeting (EGM) held by both financial institutions.

The shareholders who unanimously voted ‘Yes’ at the respective meetings held in Lagos, said in separate chat with THISDAY, that the deal would add value to their investments.

Access Bank had entered into a recapitalisation agreement with Intercontinental Bank- a rescued bank, in order to enable the latter scale the recapitalisation hurdle which was set by the Central Bank of Nigeria (CBN).

Shareholders of Access Bank authorised the bank to “enter into a transaction for the acquisition by the bank through a special purpose vehicle, 75 per cent controlling equity interest in the authorised share capital of Intercontinental Bank Plc, under a private placement.”

The shareholders among others, also supported the bank’s plan to “utilise the sum of N53.472 billion standing to the credit of the bank’s 2007 public offer proceeds account or any part thereof,” in entering into the investment.

Responding to questions from the shareholders, Group Managing Director and Chief Executive Officer, Access Bank, Mr. Aigboje Aig-Imoukhuede, explained that the deal would bring about a lot of accretion in value.

The Access Bank boss explained: “For a number of reasons, we have explained the shareholding dilution aspect of this transaction. We have not explained the final accretion in details. We have told you confidently however, that the synergy would bring a lot of accretion in value. Simply put, we would become one of the most formidable banks in sub-Saharan Africa. If you even go through the arithmetic, it means that in about 18 month time, our performance may not be absolutely different from that of a Zenith Bank or a First Bank.

“It is best for shareholders’ value. One thing we recognise is that there should be harmony as much as possible for our shareholders and we have tried in negotiating this transaction to create harmony among all our shareholders, both for those exiting and those we are inviting in. It would be very difficult for anybody to look at this deal and say that Access Bank has been unfair.”

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