Merger: As Investors React, Diamond, Access Bank Share Prices Rise
The share prices of Diamond Bank Plc and Access Bank Plc increased by 9.47 per cent and 9.40 per cent, respectively, as they confirmed their proposed merger in the early hours of Monday.
Diamond Bank emerged the top gainer at the end of trading on the floor of the Nigerian Stock Exchange on Monday as its share price gained nine kobo to close at N1.04.
The volume of shares traded in Diamond Bank increased by 890.94 per cent to 70 million from the seven million recorded on Friday, while its market capitalisation increased to N24.086bn.
Access Bank was the second on the gainers’ table, as it closed at N8.15 per share.
The volume of shares traded in Access Bank, however, dropped to 13.615 million from the 18.152 million recorded on Friday, as its market capitalisation stood at N235.76bn.
Diamond Bank said in a statement that the proposed merger would involve Access Bank acquiring its entire issued share capital for a combination of cash and shares in Access Bank via a scheme of merger.
The statement said based on the agreement reached by the boards of the two financial institutions, Diamond Bank shareholders would receive a consideration of N3.13 per share, comprising of N1.00 per share in cash and the allotment of two new Access Bank ordinary shares for every seven Diamond Bank ordinary shares held as at the implementation date.
It said the offer represented a premium of 260 per cent to the closing market price of N0.87 per share of Diamond Bank on the NSE as of December 13, 2018, which was the date of the final binding offer.
The Securities and Exchange Commission said the two banks were yet to formally apply for a merger.
In a statement on Monday, SEC said it was aware of the intention of the two banks to go into a merger and was awaiting their application on the matter.
SEC said, “Access Bank and Diamond Bank both notified the commission on December 17, 2018 about a notice to merge; they have not merged yet.
“The commission is currently waiting for their formal application.”
The Managing Director/Chief Executive Officer, Diamond Bank, Uzoma Dozie, said upon the completion of the merger, Diamond Bank would be absorbed into Access Bank and would cease to exist under Nigerian law.
He said, “The current listing of Diamond Bank’s shares on the NSE and the listing of global depositary receipts on the London Stock Exchange will be cancelled as soon as the merger becomes effective.
“Diamond Bank expects the transaction to complete in the first half of 2019. There is a clear strategic rationale for the proposed merger and strong complementarities between the two institutions.”
Dozie said the board of Diamond Bank believed that the proposed combination of the two operations would provide an exciting prospect for all stakeholders in both businesses and would create a financial institution with the scale, strength and expertise to capitalise on the significant opportunities in Nigeria and sub-Saharan Africa more broadly.
However, analysts, who spoke to our correspondent in separate interviews, said the merger might not be in the best interest of Access Bank shareholders.
The Head, Research and Strategy, Cordros Capital Limited, Christian Orajekwe, said the merger would have a dilutive effect on the existing shareholders of Access Bank.
He said, “The percentage holding of people’s shares in Access Bank will drop because the merger will create new shares to a new set of investors.
“For the shareholders of Diamond Bank, it appears positive because as at the date of the transaction, the share price of Diamond Bank was 87 kobo, but Access Bank is acquiring Diamond Bank for N3.13.
“The conversion rate means that fewer shares of Access Bank will be given to Diamond Bank shareholders at a higher price.”
Orajekwe described the merger as a net game for Diamond Bank shareholders, which he said reflected as an increase in the bank’s share price at the end of trading on Monday.
He added that Access Bank shareholders would gain in the long run as the acquisition would have a positive effect on the bank.
“Essentially, the merger is coming at the right time because share prices in the capital market are currently low and Access Bank is paying lesser to consummate the transaction, which is a good thing,” Orajekwe said.
The Managing Director, Afrinvest Securities Limited, Ayodeji Ebo, described the proposed merger as a positive development for Diamond Bank, more so, as over 200 per cent of the bank’s premium would be paid.
He noted that the impact on Access Bank would only be seen in the medium to long term as the effect of the synergy would take a while, in terms of cleaning up the books and integrating.
Ebo said, “Diamond Bank employees may be affected as some branches may be shut, especially if they are located close to each other.
“The merger may likely lead to job losses. However, as the bank gets bigger, they may employ more people.”
The Chief Executive Officer, Financial Derivatives Company, Bismarck Rewane, said, “Industry consolidation is always a welcome development because it will make the industry stronger and intensify the competition, which is good.
“The merger will not disrupt anything; instead, it will create value.”
