Financial analysts have described the current wave of mergers and acquisition in the country as the second round of consolidation.
Between September 11, 2014 and now, the Asset Management Corporation of Nigeria (AMCON) has announced names of the preferred bidders for two of its three banks pencilled down for sale.
On September 11, AMCON announced Heritage Bank Limited as the preferred bidder for Enterprise Bank and followed up, three weeks after, with the selection of Skye Bank plc as the preferred bidder for Mainstreet Bank Limited.
Skye Bank, a leading tier 2 Bank in Nigeria, was among the eight banks recently designated as ‘Systemically Important Banks’, which reflects its industry leadership, strong market share, diverse location spread, and strong brand equity.
AMCON, in a statement signed by Kayode Lambo, its head, corporate communications strategy and research, announced Cedar One Investment Partners Limited as the first reserve bidder and Fidelity Bank plc as the second reserve bidder for the acquisition of the entire issued and fully paid up ordinary shares of Mainstreet Bank Limited.
The corporation explained that the transaction had been approved by its board of directors. It, however, pointed out that the completion of the transaction was subject to the fulfilment of the conditions precedent as stated in the Share Sale and Purchase Agreement (SPA) to be executed with Skye Bank as well as the receipt of all required regulatory approvals from the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC).
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However, within four days of the announcement of Skye Bank as the preferred bidder by AMCON, the Bank effected payment of the mandatory 20 percent before the expiry of the one week given.
This was on October 9, the same day it signed the Share Sale and Purchase Agreement. And in a display of buoyancy and commitment to see the deal through, the bank again, paid the 80 per cent balance to complete the take-over of Mainstreet with one week to the deadline given by AMCON.
AMCON had announced Skye Bank as the preferred bidder for the acquisition of all its interest in Mainstreet Bank, representing the entire capital of the bridge bank. Skye Bank emerged the preferred bidder after a rigorous bidding exercise that spanned five months, with over 20 bidders contending.
Reacting to the development, Skye Bank said the acquisition of Mainstreet Bank was part of its strategic plan for growth. Skye Bank emerged from the very successful merger and integration of five banks in 2006, following the first phase of the banking industry consolidation.
The Bank intends to leverage its wealth of experience from the successful integration of five banks to drive efficiency, increase market share and ultimately ramp up stakeholder value from the acquisition of Mainstreet Bank.
According to Skye Bank, the acquisition will avail it of many benefits, including cost leadership, business optimisation, and greater ability to offer business convenience to its teeming retail and commercial customers, with a combined branch network of over 450, across all the states of the Federation.
Skye Bank plc has given details of how its acquisition of Mainstreet Bank Limited will positively impact its business operations and enhance the achievement of its strategic objectives and goals.
The bank said the acquisition would help deepen its penetration of the South East and Niger Delta regions where it is currently less represented, explaining that out of Mainstreet Bank’s 201 branches and nine subsidiaries, 26 per cent or 54 branches are located in the two regions.
“These two regions also accounted for 28 per cent of Mainstreet Bank’s over 1.9 million customers, second only to Lagos with 37 percent. This clearly shows that the integration of Mainstreet Bank will enable us make valuable in-roads into these two regions without the need to incur huge expenditure had we remained a single entity as Skye Bank,” the top lender explained.
Besides, Skye Bank explained that the acquisition would bring valuable synergies from the mutual focus areas of commercial and retail banking of the two entities in a larger Skye Bank. The bank noted that its focus is on retail and commercial banking, which are also the main focus areas of Mainstreet Bank Limited.
A flip through Mainstreet Bank Limited’s 2013 audited results, put retail and commercial banking contribution at 78 percent, 36 percent, and 18 percent of total deposits, total loans and profit before tax. Also, Mainstreet’s savings and demand deposits accounted for 21 per cent and 43 per cent of deposit mix, which also demonstrated its focus on these two segments.
Mainstreet Bank, according to insiders to the deal, has a large pool of very loyal institutional and corporate customers, in spite of its status as an AMCON-owned bank, ascribing customer loyalty to the existence of Mainstreet’s current 1.9 million customers, a little less than the pre-AMCON take-over figures.
On agriculture lending, Mainstreet Bank Limited has a history of successfully managing agricultural loans, with agric loans accounting for 12.6 per cent and 16.9 per cent of its loan portfolio in 2012 and 2013, second only to ‘general’ sector.
It said Mainstreet Bank’s expertise in managing agric loans made its non-performing loan ratio to be very negligible at 0.01 percent, saying Skye Bank saw a significant opportunity to improve its expertise in this area, and therefore raise its market share in the agriculture sector.
It would be recalled that AMCON recently announced Skye Bank as the preferred bidder for Mainstreet Bank in which over 20 banks bided to acquire AMCON’s 100 percent stake in the bank wholly owned by the Company.
