Mergers & Acquisitions Project


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  • By any measure, the recapitalization requirements announced in 2005 were of a magnitude. The merits of the exercise were widely applauded and, indeed, have led to a radical transformation of Nigeria's banking system for the better but there was also a downside on how to professionally manage all that extra liquidity and to put it to profitable use.The shareholders putting up such investment naturally expect returns and so there is no room for complacency by the banks despite their piles of cash.
  • The total shareholders funds was made up the following: Guardian Express Bank $76.83m, Citizens $59.90m, ACB $0.32m, Fountain $0.63m, Omega $74.33m, Trans-International Bank $22.07m.
  • In June 2007, Spring Bank Plc, one of the 25 banks that emerged from the recapitalization exercise, was declared insolvent by CBN in 2007 and the board of the bank was dissolved.CBN conducted another verification exercise post merger alongside the Nigeria Deposit Insurance Corporation (NDIC) a few months later.For instance, in the case of Citizens, the bank had converted depositors’ funds to equity to shore up its shareholders' capital. The CBN/NDIC verification team showed that the bank's shareholders' funds were in a deficit. It was also discovered that by means of financial engineering, some of the banks had used  bubble capital to  increase their shareholders funds and that this had given them a better bargaining edge during the pre merger discussions.To prevent a run on the bank, CBN stepped in and sacked the board of directors but afterwards appointed an Interim Management Board (IMB) on June 25, 2007. to oversea the affairs of the bank .  The IMB was given an 18th month period to stabilize affairs at the bank, which due to the crisis had seen the Nigeria Stock Exchange (NSE) placing the bank’s shares under full suspension to protect investors.
  • The bank's move to acquire Spring Bank began to manifest in the week of August 15, 2008, when 3.45 billion units of Spring Bank's changed hands for $150.38m in just 373 deals on the floor of the stock exchange. Bank PHB acquired 33% stake in Spring Bank through two investment outfits, Westcom Technologies and Energy Services Limited. In order to comply with SEC's mandatory bid rule 131 which states that having acquired up to 30 per cent but less than 50 per cent of Spring Bank's shares, Bank PHB  was to offer a fair price to other shareholders of  Spring Bank if it wants to have controlling stake in the bank. By December 18 2008, Bank PHB had obtained approval from the CBN to appoint a new board and management for Spring Bank. The new team resumed four days later and soon embarked on an aggressive rebranding of Spring Bank.
  • Rencap stated that this is not only a good deal for Bank PHB and Spring Banks shareholders but also for customers, regulators, and employees.Customers of both banks, according to the report, will benefit from the emergent institutions expanded distribution network as they will also have the additional comfort of banking with a much larger bank and extended product offerings.
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