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Unity Bank’s shares fell 8.9 percent to N1.23 naira despite reports that New York-based Private Equity firm Milost Global Inc, is offering to inject as much as $1 bn (N360 bn) to recapitalize the bank.
Bloomberg reported yesterday that Milost offered to invest $700 million in equity and $300 million in five-year bonds that can be converted into shares in the Nigerian lender.
The private-equity firm will get an initial stake of about 30 percent in the Lagos-based bank in exchange for its first equity investment of $250 million.
Unity Bank closed trading at N1.23 per share on the Nigeria Stock Exchange (NSE) on Monday and has a market capitalisation of N14.37 billion.
This means the proposed 30 percent Unity Bank stake Milost intends to acquire for $250 million (N90 billion), values the entire company at N300 billion or N25.6 per share.
Milost says it buys shares of a company at a minimum 50 percent premium to its market value, and then pegs this price over the next 90 days. If the stock fails to exceed this threshold, the target company will pay the difference to Milost in the form of extra stock, and a penalty of 10 percent to 20 percent of the discount that the share is trading at over a five-day period.
The proposed premium for Unity Bank on this particular deal by Milost is however 1,981 percent, according to BusinessDay calculations.
BusinessDay had earlier reported that the numbers do not add up for most of the deals announced by Milost.
An investment in Unity Bank will be Milost’s third announcement it is investing in a publicly traded Nigerian company since it said it will $350 million into oil-services company Japaul Oil and Maritime Services Plc in February and to provide a $250 million financing facility to Resort Savings & Loans Plc.
Net income at Unity Bank slid almost 54 percent to N2.18 billion ($6.1 million) in the 12 months through December 2016, with assets of N493 billion, according to the company’s latest annual report. Its NPLs stood at 48 percent in 2016, when it reported its second straight year of negative capital adequacy ratios, the report showed.
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