Access Bank Plc is planning a rights issue to raise additional capital of about $200 million next year, when it concludes its deal with Diamond Bank Plc, National Daily has gathered.
While the deal has not been made official, National Daily learnt that the fund raising is to keep its capital well above regulatory requirements.
With the acquisition of Diamond Bank, which is expected to be completed in the first half of 2019, bankers handling the rights issue, said the move would enhance the new entity’s capital base and business development.
The proposed business combination deal between the two banks will result to a combined entity with total asset size of N6.108 trillion.
This, according to the third quarter unaudited results of both banks for the period ended September 30, 2018, means that the new combined entity will have the largest asset size among the banks in the country, thereby displacing Zenith Bank Plc and Guaranty Trust Bank Plc, respectively.
While Zenith Bank reported total assets of N5.618 trillion in its unaudited results for the third quarter of 2018, GTBank’s stood at N3.443 trillion.
Similarly, when the merger deal is concluded, the new institution would hold total customer deposits of N3.543 trillion.
This is slightly higher than that of Zenith Bank, which was N3.275 trillion as at the end of September 2018, as well as GTBank’s total customer deposit of N2.239 trillion as at the end of the third quarter of 2018.
In addition, the loan book of the new entity would be N2.703 trillion, higher than that of GTBank, which was N1.270 trillion as at September 30, 2018, and that of Zenith Bank Plc which was N2.066 trillion as at September 30, 2018.
Speaking on Arise TV yesterday, the Chief Executive Officer of Cowry Assets Management Limited, Mr. Johnson Chukwu, hailed the deal.
“Diamond Bank had huge non-performing loans (NPLs) which were weighing down the performance of the bank. And when you have huge NPLs, it leads you to lose your liquidity.
On their part, analysts at Lagos-based CSL Stockbrokers Limited, stated that Diamond Bank shareholders stand to benefit considerably from the merger, considering that the offer was at a premium of 260 per cent over the market price as at the date of the final binding offer (December 13) while Access Bank was priced at market price.
The financial advisory firm noted in a report yesterday, that the transaction would be, if it goes ahead seamlessly, a good strategic deal for the shareholders of both entities.
They, however, pointed out that mergers and acquisitions are complex and “we do not expect to begin to see synergic benefits translate into profit in the near term.”
“We also expect that integration issues which are not strange to Access Bank, considering its prior acquisition of Intercontinental Bank, will slow down growth of the combined entity in the near term,” the firm added.